Is Now Really the Time to Call China a Currency Manipulator?

Wednesday, September 21, 2011 23:43
Posted in category The Big Picture
Comments Off on Is Now Really the Time to Call China a Currency Manipulator?

With the 2012 elections now in full motion, and candidates needing to show they are doing something “for the country”, it looks like China has once again find itself in the cross hairs.

At a time when Congress is deeply unpopular with the American public, Senate Majority Leader Harry Reid has embraced a get-tough-with-Beijing stance as part his jobs agenda even if it is not on President Barack Obama’s, promising a swift vote to pressure China to let its yuan currency rise in value.

Keeping in mind that the Yuan is already moving to 6.3X territory, China’s inflation has continued to rise, and data today showed that China’s exports fell / imports rose, I have to really question the logic and timing of this new bill

Particularly as nearly EVERYONE agrees that China is the only economic engine with steam in it.

In the absence of logic  (or a fundamental understanding of economics), the above is being supported by the news that with SOARING costs in China will come U.S. jobs.

So, will the U.S. finally come out and call China a currency manipulator?

I don’t think so, and sadly as much as I would agree that the U.S. needs to do something about the jobs situation, I categorically reject the idea that China’s rising costs are going to be a big positive for U.S. jobs.  Few, VERY few, firms see the U.S. as the alternative to China.. and most of those are firms who never really committed 100% to China.  they sent a single line, a shift, a product from the portfolio, to China… and perhaps for the better.

But, the groups who moved everything to China?  The groups who built factories here?  Those groups are staying in CHina for now because the potential investment loss and lawyer fees are far higher than bumping labor costs up the 15% that are being demanded…. and when that tipping point comes… when those firms look elsewhere… the U.S. is going to find itself competing against the like of Indonesia, who I have heard a LOT about lately for their labor force, open policies, and logistics capacity…. Mexico (and old time NAFTA favorite)…. and Eastern Europe…

Of course that tipping point will come well after the 2012 election, which begs the question… is now really the time to call China a currency manipulator?  At a time when EVERYONE is talking about the need for governments around the world to begin WORKING TOGETHER to fix the economic crisis(s) that exist?




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