U.S. Pros and cons on the Chinese yuan

Jul 01, 2007 | 07:27 AM |

Few trade policy issues get the pulse pounding faster than the value of China's currency, over which the Chinese government keeps tight control. The exchange rate is currently around 7.7 yuan per U.S. dollar—an increase in the value of the yuan since the Chinese allowed their currency to "float" in July 2005 but not nearly enough for critics of China's trade policy, including many lawmakers on Capitol Hill.

Below are the opinions of two of the most outspoken voices on the issue. Peter Morici, a former director of the Office of Economics at the U.S. International Trade Commission, is a recognized expert on international economic policy. Daniel Griswold is director of the Cato Institute's Center for Trade Policy Studies.

AMM Is China manipulating its currency?

Morici That's not a theoretical issue—its intervention in currency markets is recorded by the Bank of International Settlements and the International Monetary Fund (IMF). China consistently buys dollars in foreign exchange markets with yuan that it prints to keep the dollar expensive and the yuan cheap. This prevents the balance-of-trade deficit from correcting. They buy as much currency as they need to maintain the target rate. If they bought less currency, the value of the yuan would go up and the dollar would go down.....





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