China Leaves Currency Policy Unchanged

Jason Sandefur

Despite a request from U.S. Treasury Secretary John Snow during a recent visit to Beijing, China declined to revalue its currency, leaving the yuan pegged to the U.S. dollar at an exchange rate of 8.28 yuan to 1 dollar. Many U.S. manufacturers accuse China of keeping its currency at artificially low levels to encourage cheap exports, a practice that has contributed to the loss of millions of U.S. domestic manufacturing jobs since 2001, according to the Philadelphia Inquirer. Chinese officials hinted they might loosen exchange-rate controls sometime in the future, but would not speculate on a specific date.
Critics say a cheaper yuan is key to China�s $103 billion trade surplus. The Inquirer reported that the National Association of Manufacturers has accused the Bush administration of swapping U.S. jobs for China�s support in the global war on terrorism, including China�s offer to help mediate a standoff between the U.S. and North Korea over nuclear weapons. However, a large portion of Chinese exports come from U.S. companies with manufacturing operations in China.
Some Chinese officials say the loss of U.S. manufacturing jobs is due to wage disparity between the two countries, not currency valuations.
The Bush administration recently called for China to revise its currency practices. The Washington Post reported that the president faces little support among voters for his handling of the economy and hopes to shore up his reelection campaign with a strong economic message. The Bush administration announced the creation of a new position, assistant secretary of commerce for manufacturing and services, to give manufacturing a stronger voice in Washington and help put Americans back to work. The Post said unemployment could hurt Bush�s bid for reelection.
Manufacturing has been hardest hit by the recession, accounting for 2.5 million of the 2.7 million jobs lost since Bush took office. The president also faces criticism for imposing three-year tariffs on imported steel, a move the World Trade Organization says violated global trade practices. The White House has appealed the ruling, but some advisors have recommended the president repeal some of the steel tariffs, a decision that could come later this month. Fastener manufacturers and other steel users have been hurt by higher steel prices. \ �2003 FastenerNews.com