CHINA CURRENCY COALITION
FOR IMMEDIATE RELEASE
Contact: Meg Mullery 202.342.8439
U.S. Workers Losing to China’s Manipulated Currency
(Washington, D.C.) (December 3, 2004)—A coalition of organizations committed to maintaining a strong industrial base today stated that manufacturing jobs in the United States are not likely to recover from their current losing streak until China and other Asian countries appreciate their currencies.
The China Currency Coalition offered this prognosis in response to today’s U.S. Department of Labor announcement that manufacturing jobs decreased again in November. According to the announcement, manufacturing jobs decreased by 5,000, the third month of declining employment in the manufacturing sector. Production workers endured the hardest hit with a loss of 9,000 jobs, the third consecutive month declines were reported.
“Even with the decline in the value of the dollar on international markets, China’s currency- because of its hard peg to the dollar-depreciates just as much, thus stealing the jobs that U.S. manufacturers would otherwise have gained from an increase in exports,” explained David A. Hartquist, spokesperson for the Coalition. “The situation is made worse by other Asian countries aligning their exchange rates to the Chinese yuan.”
The Coalition contends that China’s exchange rate policy places enormous burdens on those currencies that float against the dollar. Whereas the value of the dollar and other major currencies are market determined, the yuan is set by fiat – fixed at an 8.28 yuan per dollar. The result is that as the dollar depreciates against other major free floating currencies such as the euro, the yuan also depreciates against those currencies, when, in fact, it should be appreciating. Thus, other free floating currencies must appreciate more than necessary to compensate for the fixed yuan. Other Asian countries, particularly Japan, also officially maintain their exchange rates within a relatively stable range with the yuan and the dollar so as not to jeopardize their access to the Chinese and U.S. markets.
China’s undervalued exchange rate policy threatens the global financial system and undermines its own economy. Respected economists agree that China’s exchange rate is undervalued with estimates ranging from 15-85%. The Coalition estimates that the degree of undervaluation is about 40%. The undervalued exchange rate effectively subsidizes China’s exports and taxes
China’s imports. Furthermore, it makes investment in China cheap, thus stimulating the continued growth in foreign direct investment in China to an unprecedented level of $53 billion in the first ten months of 2004. China’s foreign exchange earnings now are approaching $515 billion, almost $100 billion more than the comparable period last year. As a result, China’s inflation rate has increased to over 5% compared to the deflationary period of a few years ago. China’s money supply is growing 17-20% annually and China has had to adopt administrative directives prohibiting bank loans to some industries in an unsuccessful effort to cool down its overheated economy.
The China Currency Coalition is an alliance of industry, agriculture, and worker organizations whose mission is to support U.S. manufacturing by seeking an end to Chinese currency manipulation.
David A. Hartquist is a senior member and head of the International Trade and Customs practice at the Washington, D.C. law firm of Collier Shannon Scott PLLC.