Thursday, December 8, 2011

Why does the U.S want China to increase the value of the RMB?

I get why China wants to maintain its pegged currency rate to the U.S because they are an export-based economy. But why does the U.S want China to increase the value of the RMB?|||The thinking is that if the RMB went up, that would make Chinese exports more costly, and American imports into China cheaper, which would reduce the trade imbalance between China %26amp; the US.|||http://krugman.blogs.nytimes.com/2010/03鈥?/a>





or, in less wonkish terms:


http://krugman.blogs.nytimes.com/2009/12鈥?/a>





P.S. It isn't the trade imbalance between the U.S. and China that matters, it is the trade imbalance with the U.S. and the rest of the world.





If China increases the value of the yuan, it may not reduce total U.S. imports at all (the U.S. would just buy the same goods from other places with cheap labor)


http://www.npr.org/blogs/money/2010/03/h鈥?/a>


http://www.mrswing.com/articles/Vietnam_鈥?/a>


http://www.scandasia.com/viewNews.php?co鈥?/a>





But it would get China to buy more U.S. exports.

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