Thursday, 29 Mar, 2007 Politics

Possible Aggressive Approach from the U.S. towards China


USA China FlagsA bill is being considered by the U.S. legislators to force the Chinese authorities to raise the value of the yuan, the Chinese national currency.

Eswar Prasad, a senior professor of trade policy at Cornell University, warned the legislators that the present bill could become more harmful to the relationship between the two countries than the legislators could expect. Taking in consideration, that prof. Prasad has had much experience in this sphere while working as a China trade expert and as an economist at the International Monetary Fund, one could say that the legislators should count with what the professor says.

The professor mentioned that it was unlikely for this bill to influence on a large scale the problems the legislators are trying to avoid, such as the U.S. trade deficit and instabilities of the Chinese economy. He added that this measure could also have an international impact, by brining instability in the global economy.

Prof. Prasad said that the U.S. should rather work some ways to collaborate with China to transform its economy, instead of 'forcing them' change something.

This strategy could be more effective, Prasad said, because it could improve the macroeconomic situation in China and would relief the international tension.

The reason for issuing the bill under discussion was the fact that the Chinese yuan is undervalued by about 40% and this fact advantages the Chinese manufacturers over international firms in terms of pricing. Thus two Democrats and two Republicans wanted to force a raise of the Chinese national currency, yuan, against the U.S. dollar.

The bill will need a two thirds support both in the House of Representatives and the Senate, in order it would not be vetoed in the future by the President Bush.

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