Five Options for Tackling Trade With China
The U.S. needs much more than an exchange-rate "head fake" from Beijing to correct the glaring trade imbalance.
Policies must be challenged
By Peter Coy
For one day?Monday, June 21?America's economic relations with China seemed to be on the right track. The Chinese currency jumped in value following a weekend announcement by the People's Bank of China that it would increase the flexibility of the exchange rate. A stronger yuan raised hopes for U.S. exporters trying to penetrate the booming Chinese market and gave domestic American producers competing with cheap Chinese imports a much-needed boost at home. Treasury Secretary Timothy Geithner said China's move would "make a positive contribution to strong and balanced global growth."
On June 22, the relationship was back to normal. The yuan gave up half of the previous session's gains as traders concluded that the central bank's commitment to flexibility did not imply a large and sudden increase in the yuan's value. U.S. labor leaders and some members of Congress argued that China's announcement was timed to deflect criticism by the U.S. and other nations at the Group of 20 summit in Toronto on June 26 and 27. "It looks to me like it was kind of a head fake. They're not contemplating anything like what we need," says Clyde Prestowitz, president of the Economic Strategy Institute, a Washington consulting firm.
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