The Obama administration appears to have backed off from pressuring China to revalue its currency, for now, likely in exchange for diplomatic concessions including helping to pressure Iran on nukes. Chinese currency revaluation is about jobs, because currently China enjoys a competitive head start of up to 40% lower prices because they are keeping their currency too low.
There was a good segment on this on NPR today, U.S. Lawmakers Complain China Manipulates Yuan. Please click through to listen.
From the segment: Senator Chuck Schumer, talked about bill his to make it automatic to brand China as a currency manipulator and impose consequences — if certain objective criteria defining currency manipulation are met. He says “You start playing by the rules or we’re going to make you play by the rules.” As for “higher” diplomatic concerns, “To me nothing is more important than jobs.”
Scott Paul of the Alliance for American Manufacturing,
“I don’t know that soothing diplomacy is going to produce results.” He suggests that it was pressure, not silence, that has led to past Chinese sops at currency revaluation. As for the delay, “If it is just face-saving for China it is a waste of 3 months. If it produces meaningful change it will be worth the wait.”
Worth it or not, we wait.