China, Holding Upper Hand on Exchange Rate

China Says It Will Not Adjust Exchange Rate By SEWELL CHAN
Published: March 24, 2010

WASHINGTON — Despite mounting pressure in Congress for the Obama administration to declare China a currency manipulator, the Chinese government is giving no indication that it will change its exchange rate policy.

After meeting with officials at the Treasury and Commerce Departments on Wednesday, China’s deputy commerce minister, Zhong Shan, told reporters, “The Chinese government will not succumb to foreign pressures to adjust our exchange rate.”

Important Points in the article:

- Mr. Zhong's visit to Washington comes weeks before an April 15 deadline for the Treasury to deliver its semiannual report on foreign exchange. Many economists believe that China has deliberately undervalued its currency to support its export-oriented economy.

- China's position has raised the ire of members of both parties in Congress, who say that the exchange-rate problem is holding back job growth in the united States.

-The Treasury has not found China to be manipulating its currency since 1994, making the argument among others, that manipulation involves intent.

-Senator Lindsey Graham (R) South Carolina states that, "China's merchantilist policies are hurting the rest of the world, not just America. It helped create the global recession that we're in. The Chinese want to be treated as a developing country, but they're a global giant, the leading exporter of the world.

- Two senators pointed to a new study by the Economic Policy Institute, a labor- backed research organization, saying the growing trade deficit between China and the United States resulted in the elimination or discplacement of 2.4 million American jobs between 2001 and 2008.

Watch Video: Business News Network (Out of Canada great programming) The Close : March 24, 2010 : Quantifying China's Cheap Currency [03-24-10 4:35 PM]

Much of Adam Smith's The Wealth of Nations is an attack on mercantilism. The Wealth of Nations, one of the earliest attempts to study the rise of industry and commercial development in Europe, was a precursor to the modern academic discipline of economics.