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China’s Subsidized Currency Pushes Trade Deficit to New High

(Washington, D.C.) (August 12, 2005) – The U.S. bilateral trade deficit with China was pushed to a new high in June by China’s subsidized currency according to the China Currency Coalition, a coalition committed to maintaining a strong U.S. industrial base. The June bilateral deficit with China rose to $17.6 billion. Based on the first six months of 2005, the bilateral deficit with China is running at an annual level of over $210 billion – a 30% increase over the 2004 deficit.

“China’s exports to the United States continue to surge because China is subsidizing it currency on an unprecedented scale,” said David A. Hartquist, counsel to the China Currency Coalition. “China’s undervalued currency not only increases its exports but it pulls manufacturing investment into China. No wonder U.S. manufacturing jobs continue to decline even though the U.S. economy continues to expand.”

The Commerce Department announced today that the bilateral trade deficit with China reached $17.6 billion in June and amounted to $90.1 billion for the first half of 2005. On an annualized basis, the bilateral deficit with China is running at a level of $213 billion. In addition, the Department of Labor announced this month that manufacturing jobs declined by 4,000 in July.

“The China Currency Coalition is also discouraged that the Chinese government has not used the exchange rate flexibility in its new currency regime to extend the recent slight appreciation of the yuan beyond the 2 percent appreciation,” said Mr. Hartquist. A chart that shows China’s exchange rate remaining relatively constant, thereby indicating China’s continued intervention in the marketplace to maintain a fixed exchange rate, can be found on the coalition’s home page: www.chinacurrencycoalition.org.

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.

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