China Currency

I rarely rant about classwork, but I am going to do so now because it's one of the most relevant international trade issues of the day. If your are not interested in China currency issues, I suggest you check out the other posts or just doodle for a while.

Today, I had a presentation where I argued that the next big thing for the Consumer Electronics industry is China and that all White and Brown goods producers ought to direct heavy FDI in China. So someone, a wacko socialist who despises all that is common sense, decided that he wanted to pick a fight with me in Q&A.

He asked a question on China Yuan and valuation citing, perhaps unkowingly, the tired and untrue AFL-CIO argument that China's Yuan is so undervalued that if it were to be floated the US trade deficit would disappear because Chinese exports would become so expensive.

First of all, AFL-CIO does not count as an authority on any issue of economic policy and it's a shame that so many Republicans down south have bought this hook, line, and sinker. (Specifically Don Manzullo)

Second, various organizations, including the Cleveland Federal Reserve have done studies and shown that the Yuan is NOT undervalued, but overvalued. Here is one such study.

Third, so what? Even if China's currency was undervalued, what would these portectionist (liberal and conservative) would have it do? China is too big to have a floating currency. As much as it annoys me, I have to admit that this one area when the libertarian idea of a non-floating, centrally controlled monetary policy makes sense. This is exactly what US did for most of its history and these American anti-China politicos should remember their history.

More on this later.