Reposted from the Dow Jones Newswire via the American Iron and Steel Institute’s Daily Media Report
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US Rep Levin Sees Need For China Currency Bill
April 17, 2012 | Dow Jones Newswire
WASHINGTON — A leading Democratic lawmaker on trade issues said Monday legislation to get tough on China’s currency policy is still needed despite new measures allowing for greater flexibility in the yuan.
Rep. Sander Levin (D., Mich.), the top Democrat on the House Ways and Means Committee, told reporters the yuan is ” still very much undervalued.”
At a briefing, he reiterated his call for Speaker John Boehner (R., Ohio) to allow a vote on a Senate-passed bill that would force the White House to take a more aggressive stance against undervalued currencies. Boehner and other critics of the bill warn it could spark a trade war.
Even with the yuan’s appreciation in recent years, Levin said it probably remains about 25% below its fundamental value.
Still, he said the People’s Bank of China’s announcement over the weekend that it would widen the yuan’s trading band against the dollar from 0.5% to 1.0% above and below a daily reference exchange rate was a move in the right direction.
“It’s a step, but we’ll have to wait and see if it really matters,” said Levin.
The US having a strong dollar and being the world’s reserve currency could have been used to the US advantage all along. With a strong dollar the US all these years could have imported all the high tech capital goods it wanted as well as fund R&D to improve productivity in critical industries. Instead money was printed to consume and be wasted on various overseas military adventures.
Widening the trading range is simply a confession that China sets the value of its currency, and can tune the exchange rate to be anything it wants.
Sorscher has got it right. As long as China sets the mid-point each morning and buys all the hard currencies that arrive in Chinese banks each day, nothing will change. In fact, the rate this morning is cheaper than it was on Friday, before the “reform” measure was taken. This is China’s shell game, and the US is being played for a sucker whenever it touts meaningless changes as something positive.
China Watcher, you are totally correct. It is another shell game.
I just got back from Vancouver, BC and the everyone there took both Canadian and U.S. currency. If you went to exchange dollars for Canadian, you would get a 10% discount at the merchants, a roughly 3 to 5 percent at the banks (small amounts), and less than 1/2 of one percent at the good money exchangers on the street. China has no competition from any of these sources and just doles out a 40 percent discount, thus capturing for the Chinese government the power of money exchange. No competition and limited purchases by those earning dollars means that China captures all of that value, not the people.
This is the equivalent of a 40% tariff.
Our politically divided politicians are so incompetent in running our economy. They are selling our jobs to China and then borrowing for their budget deficits from these predators.
Tom T.