The Obama administration and others are claiming that the Chinese currency is more fairly valued because it has modestly appreciated.
Alan Tonelson of USBIC shows why this is a myth.
“The upshot would then be that even though the currency has strengthened against the dollar, it is now even more undervalued than it was in 2005. For the Chinese economy’s dramatic progress since the peg was loosened, has driven the Yuan nowadays even further below where it “should be” than it was back then. As a result, a fairly valued Chinese currency today would be much stronger versus the dollar than it has become, and had it been freely traded in recent years, a major rise would have begun much sooner.
It’s clear enough why the Obama administration has embraced the claim that the undervaluation problem is largely solved. This position justifies continued inaction against a production and export subsidy that benefits the U.S. multinational outsourcers that manufacture in China and whose interests are still permitted to dominate American trade policymaking. But the scholars, other so-called experts, and pundits who have swallowed this Kool-Aid – what’s their excuse?”