China Lets Currency Weaken, Risking New Trade Tensions
Source: NY Times
Chinas currency dropped further in May against the dollar than in any other month since the Chinese government began allowing the renminbi to appreciate gradually in the summer of 2005, in a currency market shift that could help Chinese exports but worsen trade friction with Europe and particularly the United States.
By setting weaker and weaker daily fixings for the renminbi against the dollar at the start of each days trading, Chinas central bank has pushed down the renminbi 0.9 percent against the dollar in the past month. The decline in the daily fixings coincides with signs that the Chinese domestic economy is slowing sharply this spring and may need help from stronger exports.
A cheaper renminbi makes Chinese exports more competitive in overseas markets, while making foreign goods more costly and less affordable in China. The Obama administration has been pressing China for the past three years to allow faster appreciation in the renminbi, not depreciation, as a way to narrow the U.S. trade deficit with China, which reached a record $295.46 billion last year.
The U.S. Treasury Department issued a report last Friday criticizing Chinas management of its exchange rate and calling for the first time for China to release data on the scale of its foreign exchange market interventions. But the report stopped short of labeling China a currency manipulator, a label that Chinese leaders have indicated they would bitterly resent and oppose.
Read more: http://www.nytimes.com/2012/06/01/business/global/china-lets-its-currency-slip-raising-trade-tension.html
McCamy Taylor
(19,240 posts)brentspeak
(18,290 posts)a currency manipulator.
Odin2005
(53,521 posts)What do the Neo-Liberal Free Trade bastards have to say about THIS???