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Policy on Us-China Relations

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Submitted By angelawufan
Words 1175
Pages 5
Fan Wu
Briefing on Chinese Currency Manipulation - how should the U.S. respond?
Issue Definition:
In recent years, the United States has repeatedly expressed concerns with regards to the economic impact of RMB, the undervalued Chinese currency. China has been accused of unfairly manipulating its currency exchange rate in order to gain a price advantage in export. While China has benefited from this export trade advantage by artificially defining the value of RMB, it has become even more difficult for U.S. manufacturers to compete with their Chinese rivals. As a result, millions of jobs have disappeared in the U.S., mostly attributed to the U.S. trade deficit with China. It seems that many of those manufacturing positions could still exist without intervention from the Chinese government in the currency market.
Backgrounds:
The controversy about China’s currency manipulation has long been a subtle yet sensitive argument between Beijing and Washington. Without a market based floating exchange rate, the Chinese Yuan has appreciated approximately 30% beyond the dollar since 2005 (China Daily). In order to keep the value of Chinese Yuan low, the Chinese government has artificially maintained restrictions and controls over capital transactions, and has made large-scale purchases of U.S. dollars by constituting a de facto subsidy for Chinese exports to the U.S. as well as imposing a de facto tariff on imported U.S. goods.
Consequentially, this policy has severely harmed several US manufacturing sectors, especially those that have been made to compete against the low-cost Chinese products. The growing trade deficit with China has cost the United States more than 2.8 million jobs since 2001, including more than 1.9 million manufacturing jobs (Hsu). Facing the current high unemployment rate in the nation, U.S. congress members have been claiming that the currency

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