How much will taxpayers shoulder?

[Zenda]

Read the lower part of page 16, and page 17 in it's entirety. It is fully damning of PBOC intervention and China's trade policies.

Don't you exaggerate just a little? ;)

Let's go over that part, paragraph by paragraph.

"China’s exchange rate regime is officially described as a managed float with reference to a basket of the currencies of China’s major trading partners. The central bank, the People’s Bank of China (PBOC), buys foreign currencies in China’s foreign exchange market to limit the appreciation of the renminbi versus other currencies. The PBOC allowed a faster rate of appreciation against the dollar in the first half of 2008 than in any period since the end of the renminbi’s peg to dollar in July 2005. ..."

A description how things work over there, followed by good news for the US.

"Since the end of June and in the context of slowing external growth and receding concerns about inflation, renminbi appreciation has stalled against the dollar. The renminbi was virtually unchanged (rising 0.2 percent) against the dollar from June 30, 2008, to end-October. However, given the dollar’s rebound in this time period, the renminbi’s trade-weighted appreciation accelerated. Between June and October, the renminbi gained 10.8 percent on a real effective basis."

Apparantly, China has had problems keeping up the pace they achieved before. Noone is perfect, I guess.

"Despite the accelerated appreciation of the renminbi in the first half of 2008, the negative impacts of China’s gradualist approach to exchange rate reform became more apparent as nontrade, non-FDI capital inflows ballooned and the PBOC’s foreign currency intervention activities reached an unprecedented scale. The undervalued renminbi, combined with positive interest rate differentials, prompted investors to find ways to circumvent China’s capital controls to move money into China."

So, it's (private) investors using shady transactions who make up for much of the foreign capital there. Hardly something you can blame the Chinese for.

"When the PBOC intervenes, it buys foreign currency with renminbi, adding to the domestic money supply. In order to counter the inflationary effects of such large foreign exchange purchases from the corresponding creation of domestic liquidity, the PBOC 'sterilizes' its foreign exchange purchases by taking counteracting measures to recapture the money it has created. ..."

Sterilizing foreign exchange purchases by issuing bonds and such is a commonly accepted method to deal with the negative effects, as can be seen in the rest of the report.

I see no 'damning' anywhere, not even a hint at lack of proof for presumed violations.

That said, this is a government report about its own activities. Do you think they will be critical of themselves?

Doesn't that make it likely they might have wanted to blame China? But maybe there was nothing to blame them for?

Have you suddenly become enamored with the US government, and the party in power?

You should make up your mind on this. Just 6 days ago, in this very thread, you could only imagine that I'd despise the USA :whistling:

[Jester]

According to officially accepted knowledge, China has not violated any law, treaty or agreement by committing currency manupilations. What's so incomprehensible about that? It's not in Chinese, is it?:lol:

China's exchange rate policies have been challenged through the IMF, the WTO, and the GATT. It seems to be a strong argument that, from the rules of those bodies, what China is doing qualifies as a subsidy. I don't know what "officially accepted knowledge" you're referring tot. However, since there is no direct enforcement mechanism that can be levied against China, and confrontation is poor trade diplomacy, there's not much anyone can do about it

-Jester

[Jester]

Maybe you missed this paragraph in your "paragraph-by-paragraph"? The one that says:

China’s exchange rate policy impedes the needed shift towards domestic private consumption – and away from net exports and investment – as the drivers of Chinese growth; is a major impediment to financial sector development; and, constrains the development of an autonomous monetary policy tailored to stabilizing inflation and domestic economic growth.

I seem to recall making this point earlier, that the Chinese consumer is taking the brunt of this in terms of quality of living. Also, this one:

The gap between the real exchange rate and its equilibrium level remains wide and the renminbi
remains substantially undervalued, according to a number of estimates.

That would be the point about the Chinese keeping their currency undervalued.

And then there's the concluding paragraph of the China section, on page 18.

Faster and more decisive implementation of exchange rate reform is essential for maintaining
sustained, stable growth in China. If the current macroeconomic imbalances continue, in a
period in which growth has slowed materially in the rest of the world, then the vulnerability of
China’s economy and the ultimate costs of adjustment will become much larger. China needs to
move more quickly towards a market-determined exchange rate and allow greater appreciation of
the renminbi against the dollar in the near-term. The pace of appreciation against the dollar
demonstrated in early 2008 is welcome and should be continued. Treasury continues to use
every opportunity, both in bilateral and multilateral settings, to impress upon Chinese authorities
the urgency and central importance of exchange rate reform.

... which is a polite way of saying that the Chinese have to revalue their currency, because it's causing massive distortions to both their domestic and foreign sectors. Now, the US has a series of obvious interests, and a treasury department document isn't going to just out and say the unvarnished truth. But it is quite clear that, as far as the economics are concerned, they can see which way is up.

-Jester

[Zenda]

China's exchange rate policies have been challenged through the IMF, the WTO, and the GATT. It seems to be a strong argument that, from the rules of those bodies, what China is doing qualifies as a subsidy.

Is there evidence in there, that China is engaged in manipulations of the yuan for competitive gain? Could you provide some references for that, just to enlighten me?

I seem to recall making this point earlier, that the Chinese consumer is taking the brunt of this in terms of quality of living.

If you want to discuss general criticism on Chinese policies, or US' policies for that matter, you should start a separate thread. Be warned though, that it could grow into a very large thread indeed.

This discussion, however, is about Kandrathe's claim that ...

Current evidence indicates that China is engaged in just such a manipulation of the yuan for competitive gain.

I still haven't seen anything that could count as evidence. Have you?

[Jester]

I still haven't seen anything that could count as evidence. Have you?

Fact: China's Yuan is undervalued relative to the US Dollar.

Fact: Undervaluation helps the Chinese export producer and the US import consumer, and hurts the US export producer and the Chinese import consumer.

Fact: China's currency controls make it impossible for money to flow freely in and out of the country, except subject to government oversight.

Fact: China has purchased a historically unparalleled number of US Dollars.

The whys and wherefores are up for debate. Perhaps China adopted this policy for entirely benign reasons. Perhaps it has good reasons to hold on to it. However, the effects are not, in any meaningful sense, up for debate. Chinese exports to the US are higher than they would be if their Yuan could float freely. This has a protectionist effect. That is not free trade in currency, and free trade is what the WTO exists to protect. China is a member of the WTO, and thus, is doing this contrary to its obligations. Pass judgement as you like on whether this policy is good, bad or upside down, pursued for good or for ill or out of total ignorance, but these are the facts.

If what you are trying to get at is the motive of the Chinese government, then you have a long road ahead of you that will not be paved with anything I can tell you. All we have is speculation, unless you're a ranking member of the central committee.

-Jester

[Taem]

Fact: China's Yuan is undervalued relative to the US Dollar.

Fact: Undervaluation helps the Chinese export producer and the US import consumer, and hurts the US export producer and the Chinese import consumer.

Fact: China's currency controls make it impossible for money to flow freely in and out of the country, except subject to government oversight.

Fact: China has purchased a historically unparalleled number of US Dollars.

The whys and wherefores are up for debate. Perhaps China adopted this policy for entirely benign reasons. Perhaps it has good reasons to hold on to it. However, the effects are not, in any meaningful sense, up for debate. Chinese exports to the US are higher than they would be if their Yuan could float freely. This has a protectionist effect. That is not free trade in currency, and free trade is what the WTO exists to protect. China is a member of the WTO, and thus, is doing this contrary to its obligations. Pass judgement as you like on whether this policy is good, bad or upside down, pursued for good or for ill or out of total ignorance, but these are the facts.

If what you are trying to get at is the motive of the Chinese government, then you have a long road ahead of you that will not be paved with anything I can tell you. All we have is speculation, unless you're a ranking member of the central committee.

-Jester

You and Zenda are talking in circles. Can't you see what he's saying Jester? There is no "proof" other than China purchasing a large number of US dollars that China is [key-word-here] "intentionally" manipulating the Yuan. ''Prove it'', is what Zenda is saying; I also fail to see any direct proof. China has been doing these same tactics of controlling their currency that they have always been doing from what I've read, so their introduction into the WTO means nothing. It's not like China suddenly changed the way they did business just to screw over America. While I see the point you and Kandrathe have made, and I do agree that their dealings hurt the global economy to benefit their own, it is hardly illegal and well within their right, which I also believe is a point made by Zenda. America needs to find a way to deal with this by, perhaps increasing tariffs on all goods shipped from China and exported to China from America. Would this increase the cost of things "made in China?" Hell yes, then maybe Americans would start buying American and helping out their own economy for once, so maybe it wouldn't be such a bad thing. It's a sad reality that when I purchase a toy or household item and it has a tag that say's 'Made In America,' I already know it will break within the year. Let's face it, American goods just aren't what they used to be, and the other countries have taken advantage of that fact and exploited it with cheap labor. Truth in fact here Jester is America let this happen, just like they let the housing market problem build-up until - crash! Want to talk about Global Warming? America's stance has always been legislation through crisis since WWII, and I don't see this 'problem' as being any different. No, what America needs is a real change in leadership, someone who will shake the bowels of hell.

[kandrathe]

You and Zenda are talking in circles. Can't you see what he's saying Jester? There is no "proof" other than China purchasing a large number of US dollars that China is [key-word-here] "intentionally" manipulating the Yuan. ''Prove it'', is what Zenda is saying; I also fail to see any direct proof. China has been doing these same tactics of controlling their currency that they have always been doing from what I've read, so their introduction into the WTO means nothing. It's not like China suddenly changed the way they did business just to screw over America. While I see the point you and Kandrathe have made, and I do agree that their dealings hurt the global economy to benefit their own, it is hardly illegal and well within their right, which I also believe is a point made by Zenda. America needs to find a way to deal with this by, perhaps increasing tariffs on all goods shipped from China and exported to China from America. Would this increase the cost of things "made in China?" Hell yes, then maybe Americans would start buying American and helping out their own economy for once, so maybe it wouldn't be such a bad thing. It's a sad reality that when I purchase a toy or household item and it has a tag that say's 'Made In America,' I already know it will break within the year. Let's face it, American goods just aren't what they used to be, and the other countries have taken advantage of that fact and exploited it with cheap labor. Truth in fact here Jester is America let this happen, just like they let the housing market problem build-up until - crash! Want to talk about Global Warming? America's stance has always been legislation through crisis since WWII, and I don't see this 'problem' as being any different. No, what America needs is a real change in leadership, someone who will shake the bowels of hell.

If a dog craps on your shoes, what proof do you need that your shoes are really dirty? The evidence is right there, and we don't need to rub out noses in it to know we've been crapped on. Neither Jester or I have suggested that the PBOC has violated any international law, but we are saying that they have violated the spirit of "FAIR TRADE". Which makes it incumbent on our respective governments to do SOMETHING about it. They haven't, and hence my beef at least with the BUSH administration, and Hank Paulsen to be specific. You are over generalizing on the "Made in America" means its crap. If you are willing to pay a premium for toys, you can find some really good ones. Beyond cost of manufacture, the other thing that drives American business under is liability lawsuits. We've got a change in leadership, so lets see if this guy will do anything to protect American business, and labor from being pummeled out of existence.

Do some research. Check out a great American brand like Pfaltzgraff which began in the 1800's in York county Pennsylvania, which until recently was manufactured in Thomasville. In 2005, they sold out to Lifetime Brands, and were do you think this icon of Americana is manufactured now? Sure, it's only 300 or so jobs. But, this type of story repeats itself all over the world where peoples livelihood moves to where it can be made for 1/10th the cost. Now fair is fair, right. But, when the people who are doing it are cheating the system and creating a trade vacuum then our government has an obligation to stop it. They are not.

[eppie]

But, when the people who are doing it are cheating the system and creating a trade vacuum then our government has an obligation to stop it. They are not.

Isn't this all a bit of a useless discussion? Countries also decrease interest rates if they think it is necesarry to influence the economy right? And part of the riches of west european countries were obtained by plundering Afrika and Asia, and together with the US (and now also China) often still are . Bummer that the Chinese are now using their own tactics, but as long as we can't afford to boycot them we won't.
Same for all the immoral muslim extremistic middle east countries. Everybody with the right mind would want to have nothing to do with a country like Saudi Arabia untill they stop chopping peoples hands off and give women the same rights as men).....but we need their oil so we choose not to bother them with it.

I agree with the fact that ideally we need to have fair rules for everybody.....but realise that we can impossibly keep our current level of wealth.

Hope this makes sense..

[Jester]

I don't know what to tell you either, then. This isn't a question about the poor quality of American goods, economic nationalism, exploited labour, Global warming, the leaders of America, or any of that.

My point is a simple one about the effects of what the Chinese are doing with their currency, keeping the Yuan within a certain (undervalued) range. If you doubt that they are doing this, then all I can say is look it up, there's pretty strong consensus on this point. The Chinese government, as always is tight lipped about it, as with everything.

This undervaluation is a kind of tariff on imports, and a subsidy on exports. We can't read minds, so we can only speculate as to the *intent* of this policy. Krugman thinks the Chinese just stumbled into it accidentally as part of an attempt to keep their economic ship on an even keel, and now don't want to mess up their unprecedented growth. It's as good an explanation as any. However, what we do know are the *effects*. Those effects are almost certainly against the rules of a body that China voluntarily joined, the WTO.

Did the US get itself into this mess? To some extent, yes, although it takes two to tango, as they say. Would the US benefit from an end to the policy? Maybe. It would lead to a better trade balance in exchange for less ability to borrow at good rates. The effects are understood by all parties. The Chinese government is well aware of how their currency policy is affecting their exports relative to domestic consumption, if only because the US has been shouting it at them for the last decade.

-Jester

[kandrathe]

Hope this makes sense..

I worked for a firm once that attracted Filipino programmers to come over and work for about 1/2 normal US wages. It was double or triple what they earned in Manila. Within 2 to 3 years, they realized their value and things normalized with their pay. They were exploited, but because they were free to negotiate things tended to balance out in the long run.

PBOC prevents the balance from happening. I'm hopeful that Obama will do as he said, and get tough on PBOC. They are not "THE" source of pain for workers, but they are "A" source of pain which could have been dealt with over the past decade. I'm sure the economic "sell out" by Bush was also due to fighting wars, and needing the Chinese to keep North Korea in check, to withhold certain arms deals and probably stay a security council veto vote or two.

I'm just a frog that has noticed the temperatures rising in the pot here. Maybe you are content with the status quo, but I for one, can at least admit that I don't like the status quo and I'm willing to do something about it. Maybe you will care when your job is better done in India, or China at a fraction of your wage?

[Taem]

I don't know what to tell you either, then. This isn't a question about the poor quality of American goods, economic nationalism, exploited labour, Global warming, the leaders of America, or any of that.

My point is a simple one about the effects of what the Chinese are doing with their currency, keeping the Yuan within a certain (undervalued) range. If you doubt that they are doing this, then all I can say is look it up, there's pretty strong consensus on this point. The Chinese government, as always is tight lipped about it, as with everything.

This undervaluation is a kind of tariff on imports, and a subsidy on exports. We can't read minds, so we can only speculate as to the *intent* of this policy. Krugman thinks the Chinese just stumbled into it accidentally as part of an attempt to keep their economic ship on an even keel, and now don't want to mess up their unprecedented growth. It's as good an explanation as any. However, what we do know are the *effects*. Those effects are almost certainly against the rules of a body that China voluntarily joined, the WTO.

Did the US get itself into this mess? To some extent, yes, although it takes two to tango, as they say. Would the US benefit from an end to the policy? Maybe. It would lead to a better trade balance in exchange for less ability to borrow at good rates. The effects are understood by all parties. The Chinese government is well aware of how their currency policy is affecting their exports relative to domestic consumption, if only because the US has been shouting it at them for the last decade.

-Jester

For the record, I'm not disagreeing with anything you or kandrathe are saying in regards to what China is doing, and the effects it's having on our economy here in America. I actually agree 100% with everything you two have said! All I was pointing out was that you two kept repeating the same things over and over and Zenda was trying to say the same thing over and over and it seemed to me like nobody was listening, but everybody was talking. Zenda's points are valid to him, and you to yours, and I see the middle-ground. No need to explain it to me again, because trust me, I understand it. Anyways, I think I'll bow out of this conversation before I get a shoe thrown at me :whistling:.

[eppie]

I worked for a firm once that attracted Filipino programmers to come over and work for about 1/2 normal US wages. It was double or triple what they earned in Manila. Within 2 to 3 years, they realized their value and things normalized with their pay. They were exploited, but because they were free to negotiate things tended to balance out in the long run.

PBOC prevents the balance from happening. I'm hopeful that Obama will do as he said, and get tough on PBOC. They are not "THE" source of pain for workers, but they are "A" source of pain which could have been dealt with over the past decade. I'm sure the economic "sell out" by Bush was also due to fighting wars, and needing the Chinese to keep North Korea in check, to withhold certain arms deals and probably stay a security council veto vote or two.

I'm just a frog that has noticed the temperatures rising in the pot here. Maybe you are content with the status quo, but I for one, can at least admit that I don't like the status quo and I'm willing to do something about it. Maybe you will care when your job is better done in India, or China at a fraction of your wage?

As MEAT remarked, I also agree with what all of you are saying. But 'doing something about it' seems rather difficult to me.
To me it is just the basic rules of capitalism. Even if governments wouldn't do anything, stuff will get produced in places where it is cheaper, creating more jobs over there, raising wealth, increasing labor costs after which stuff will get produced in even cheaper countries until we are all equal (man I sound really right wing here). When can a country do something about it? If it is able to produce everything it needs itself. The US makes a pretty good chance, of course no more luxury goods for everybody, wealth will go down. But you are lucky, Holland for example will never be able to produce everything within its own borders....we simply don't have the land area and natural resources for that....so the only thing we can do is play along.


One other point; with fuel getting scarcer, transport will get more expensive and it will be more and more convenient to make things where they are used, instead of on the other side of the globe.

[Zenda]

Fact: China's Yuan is undervalued relative to the US Dollar

"Scholarly studies suggest that the yuan is undervalued on the basis of purchasing power parity analysis.

The World Bank estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥1.9 in 2004.
The International Monetary Fund estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥3.462 in 2006, ¥3.547 in 2007, and is expected to be equivalent to ¥3.694 in 2008."

I was counting on some clear statements from the IMF, the WTO, and the GATT, but you show me a link where 'suggest' and 'estimated' make up the most negative claims. Not that I disagree with this. Finding tubes doesn't always mean there are WMD, as we all know ;)

Fact: Undervaluation helps the Chinese export producer and the US import consumer, and hurts the US export producer and the Chinese import consumer

Noone disagreed with this, afaik. But it works both ways, in more then one way.

The US could balance things by buying yuan currency, and pay for it in dollars. The acquired yuans could then be used to pay for Chinese imports. That's how it works in other nations. Unfortunately, this would require that the US administration prints dollars even faster as it does now, which is not without risk. Inflation could become hard to control. I suppose it's better for the USA to have China make up for all the differences, and have business continue as usual :glare:

Fact: China's currency controls make it impossible for money to flow freely in and out of the country, except subject to government oversight.

Products from China are paid for in dollars, and these dollars will find their way over there, wouldn't you agree? Since the Chinese can't control how much the Americans consume, they can't control the capital flow into the country. I don't know about the outgoing money, so you may be half right, there.

Fact: China has purchased a historically unparalleled number of US Dollars.

Yes, with the goods they produced :mellow:

That is not free trade in currency, and free trade is what the WTO exists to protect. China is a member of the WTO, and thus, is doing this contrary to its obligations.

You really think that other members of the WTO would say nothing of it, if it was all that clear?

This undervaluation is a kind of tariff on imports, and a subsidy on exports.

Like EU and US' import taxes and export subsidies, to be precise.

but we are saying that they have violated the spirit of "FAIR TRADE"

With all respect, but that sounds a little hypocrit. Besides, the USA has violated too much 'spirits' lately, and you can no longer expect the world to take such claims serious.

it is hardly illegal and well within their right

I'm glad to see that at least someone got my point :)

[Jester]

I was counting on some clear statements from the IMF, the WTO, and the GATT, but you show me a link where 'suggest' and 'estimated' make up the most negative claims. Not that I disagree with this. Finding tubes doesn't always mean there are WMD, as we all know ;)

There is no such thing as a smoking gun here, no 'WMD' to find. A currency has a hypothetical market valuation, and, absent a perfect market, that valuation cannot be directly measured, period. All ways of trying to get at that problem are 'suggestions' and 'estimates', because *there is no real value to be measured.* If you can find a credible economist who thinks that the Yuan is not being held down, tell me, because I know I can find a whole raft, from left wing to right wing to politically uncaring, who think it is.

Here's the WTO trade report from 2008 on China. Try the section from page 30 to 33 of the 'economic environment' section. The 'crawling peg' created by heavy capital controls prevents the Yuan from appreciating substantially against the dollar. The WTO, being a neutralist arbitrator organization, reports the concerns that this is offering a protectionist advantage to China, but does not decide on them. Nevertheless, the outlines of what is going on are spelled out well enough.

If you're looking for a confession from the Chinese, it's not going to be forthcoming. If you're looking for a condemnation from a trade organization, that's also not going to happen, it's not what they're for. If you're looking for an objective measure of currency valuation, that doesn't exist. All we have is the evidence at hand: Heavy currency controls, a basically pegged currency, and an enormous sectoral imbalance towards exports in the Chinese economy.

Since nobody is talking about going to war over this, the standard of proof required is lower than, say, finding WMDs. All I want to know is what's going on, and I feel confident we have enough to know which way the wind is blowing.

-Jester

Afterthought: What *isn't* within China's rights? It's a sovereign nation. They can do as they please, short of starting wars. There is no international body that gives them "rights", they just act however they want until someone stops them, like most countries. The question was whether what they were doing is *fair*, which is a very different measure.

[kandrathe]

As MEAT remarked, I also agree with what all of you are saying. But 'doing something about it' seems rather difficult to me. To me it is just the basic rules of capitalism.

Right, and I'm fine with the basic rules of Capitalism at play. However, with the peg of the yuan to the dollar, there is a 60% shift in price from producer to consumer. This is anti-competitive. Things I produce would be 30% cheaper to the Chinese consumer, and the things they make would to 30% more expensive. On top of that, the Chinese worker is paid 1/10th the wage of an American. With the controls in place by PBOC, wages and the quality of life for Chinese workers also will not improve. The natural balance of the flow of Capital is weighted in favor of China, and against the rest of the world. Strong leadership in the US, or the EU, or the G8, or the WTO would have solved the issue many years ago, but here we are.

[Zenda]

Here's the WTO trade report from 2008 on China. Try the section from page 30 to 33 of the 'economic environment' section.

I have trouble finding negative remarks on Chinese trade policy in there. What exactly are you referring to?

I did find this, on page 32:

"China's overall trade policy objective has remained largely unchanged since its previous Trade Policy Review: to accelerate its opening to the outside world (with a view to introducing foreign technology and know-how), develop foreign trade, and promote sound economic development. China wishes to achieve this objective by further strengthening the multilateral trading system as embodied in the WTO, and has been participating in the DDA negotiations. The authorities stress China's commitment to the DDA and its intention to make every effort toward reaching agreement in the negotiations."

And this, on page 33:

"At the same time, China has been intensifying its pursuit of bilateral/regional arrangements involving free-trade agreements. It is of the view that whereas the multilateral trading system is the main channel to promote trade liberalization, regional and bilateral trade arrangements serve as new platforms and complement the multilateral system; regional/bilateral trade arrangements interact with the multilateral trading system in a mutually beneficial way. The authorities consider that an FTA can provide an institutional guarantee to the development of bilateral/regional trade and economic relations and benefit businesses and consumers in the participating countries and economies, by helping expand trade, achieve market diversification, reduce consumer prices, and lower producer costs; and drive economic growth and create new job opportunities. It would appear that all countries and economies that have concluded bilateral/regional FTAs recognize China as a market economy."

Also, in 'Concluding remarks by the Chairperson', I find:

"This second Trade Policy Review of the People's Republic of China has provided an excellent opportunity to improve transparency, and thereby a better understanding of China's trade and related policies."

"Members complimented China on its strong attachment to the WTO and its support for the Doha Development Agenda. Many Members also expressed their appreciation of China's assistance to LDCs."

"Members commended China's continuing reforms, including trade liberalization, which had contributed to real economic growth of over 10% annually since its previous Review, resulting in rapidly rising per capita income and poverty reduction. Many Members noted that China's growth provided an impressive example of how a country can foster development."

"Members welcomed China's move towards adopting new competition and property rights legislation."

"Agricultural reform was commended by Members, although some were concerned about tariff and non-tariff barriers and the re-introduction of price controls on some agricultural products."

"On services, many Members noted that commitments undertaken by China were more extensive than those of most other developing countries."

What *isn't* within China's rights? It's a sovereign nation. They can do as they please, short of starting wars. There is no international body that gives them "rights", they just act however they want until someone stops them, like most countries.

How come China does not have the right to start wars, in your view? Other nations, like the USA and GB, don't stick to such restrictions. Wouldn't that be unfair? :whistling:

The question was whether what they were doing is *fair*, which is a very different measure.

You have the right on your own opinion regarding fairness, ofcourse, but the WTO and US Treasury Department seem to disagree. I suppose they also misunderstood everything? :glare:

[Zenda]

But, this type of story repeats itself all over the world where peoples livelihood moves to where it can be made for 1/10th the cost. Now fair is fair, right. But, when the people who are doing it are cheating the system and creating a trade vacuum then our government has an obligation to stop it. They are not.

As usual you seem to know what the problem is, but blame the wrong people for it.

You really believe the developing countries maintain this 'trade vacuum' on purpose? It's us, Kandrathe, the consumers of the developed nations, who want or even need it to be this way. With the amount of goods we use, things have to be as cheap as possible. Much cheaper as it would be when we made it ourselves.

Besides, most developing countries are unable to profit substantially from this 'trade vacuum', because many of their industries and plantations are owned by our companies. China however, does manage to profit, despite it being considered a developing country, because it always opposed foreign take-overs. Might this be the motive behind your accusations? You hate them because they didn't allow us to turn them into a third world colony? Because they are also too big to threaten into submission?

Luckily, the solution is simple. You only need to think about the products you buy. That's all. No need to stop buying everything. Just think about the things you buy.

[kandrathe]

As usual ...

Look. You maintain that the problem is B, and I'm saying it is A+B. That is all. A= unfair currency value manipulation, and B= normal competitive capitalism pressures. How about you and I make the exact same thing, but you need to sell yours for triple my price? Our raw materials prices are the same, our productivity is the same and our wages are the same. Does it seem fair?

That is what happens with the currency manipulations. It's not just EU, and US consumers choosing China goods, its that only China production makes sense anymore due to a decade of currency manipulation. The non China producers might be able to compete even with higher labor costs, because of higher productivity, and better speed to market, but when you skew the price by 60% due to currency manipulations, it only makes sense to manufacture goods in China and spend more money shipping them to the EU or the US. The additional shipping charges, lower quality, lower production rate are overwhelmed by the currency exchange devaluation. For many items with cheap materials costs you could throw away half of the product at the factory and still out compete the same goods made in Europe or the USA.

SO AGAIN, it's more than B, it's A+B.

[Jester]

I have trouble finding negative remarks on Chinese trade policy in there. What exactly are you referring to?

I am referring to the section I stated above, pages 30 to 33 of the section "Economic Environment". It is entitled "Monetary Policy".

For instance:

According to the IMF, the observed path of the exchange rate and reserve build up, coupled with information regarding intervention, suggest that the exchange rate was mainly determined by official action, prompting this [crawling peg] classification.

While China has relaxed some capital market controls (see below), by and large, the RMB is not traded freely internationally.

From the footnotes, pointing out the concerns of the US and others:

While any assessment of whether a currency is undervalued (and the extent of such undervaluation) is fraught with analytical difficulties, the lack of flexibility of the exchange rate and its alleged undervaluation is seen by some as providing an advantage to China's exports.

And at the end on page 48:

Nonetheless, there remains the immediate issue concerning the ability of monetary policy to combat rising inflation. In this regard, a more flexible exchange rate regime could enable China to operate a more independent monetary policy, which would be better suited to ensuring a low and stable rate of inflation, and therefore contribute to a macroeconomic environment more conducive to sustained strong economic growth. A more flexible exchange rate and thus more independent monetary policy would complement structural reforms, especially those concerning the capital market, and obviate the need for price controls and other non-market measures to contain inflation. There are signs that China's exchange rate regime has become more flexible recently; in January 2008, the renminbi appreciated nearly 1.6% in relation to the U.S. dollar, the largest monthly increase since the July 2005 reform of the foreign exchange regime.

Now, read this as you will. But I think I can read the bureaucratese well enough to figure out what it's saying: The Chinese government is holding their currency down, and it's helping their exports. They agreed to float their currency in 2005, largely to get the currency reform monkey off their backs, but then kept enough official control in place that it wasn't really floating at all, but actually pegged through indirect means. Now, they compliment China on having improved things recently, but note the backhand: that their exchange rate has improved recently means that it was in a position in need of reform beforehand.

You have the right on your own opinion regarding fairness, ofcourse, but the WTO and US Treasury Department seem to disagree. I suppose they also misunderstood everything? :glare:

You have not pointed out where the US Treasury Department have said this, at the very least, and I think your read of the WTO document is wrong, although in fairness it appears you did not find the section I was referring to. You quoted the Treasury Department above, and as I pointed out then, your reading of it was at best selective, at worst completely backwards.

... and if you think, for one split second, that I believe the standards of fairness in the world are to be determined somehow relative to the baseline of the United States' actions, then I'm afraid you really need to go back to what I've written about the Iraq war and other such topics.

-Jester

[Zenda]

SO AGAIN, it's more than B, it's A+B.

Since your A seems to exist only in the minds of a few people, I'd say it's just B.