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UPDATED: April 24, 2010 NO. 17 APRIL 29, 2010
Crisis Focus: Can Yuan Appreciation Solve U.S. Problems?

At a U.S. Heritage Foundation research seminar in Washington, D.C., a group of American experts on China brainstormed how appreciating the Chinese yuan can change the high unemployment situation now facing the United States. Beijing Review conducted exclusive interviews with three of the U.S. experts on the yuan issue after the seminar. The experts collectively agreed a trade war would be a zero-sum game for both countries, and that America should assume more responsibility for its domestic problems. Edited excerpts follow:

David K. KavanaughU.S. Congressman with the Tax and Trade Counsel of Nevada: I think the bill (proposed by U.S. Senator Charles E. Schumer to label China a currency manipulator), if it comes to a vote, will pass with a lot of people voting for it. But I don't see it becoming a law. Remember the old Schumer bill? We had to vote by this date, then we postponed it for another 30 days, another 15 days and that was used as posture to push China. We always say the deadline is coming and it keeps going and it almost becomes silly.

Daniel J. IkensonAssociate Director of the Center for Trade Policy Studies: China is, of course, a scapegoat for the U.S. economic failure. We lost so many jobs not because of our trade, but because of machines and technology improvements. We used to require 10 workers on the steel production line. Now we just need one worker. In fact, China lost many more factory jobs than the United States--but of course, it has more people to begin with. A strong China-U.S. relationship supports U.S. jobs in manufacturing all the way up to engineering and design because we really work together.

Chinese workers and American workers don't compete that much. Chinese workers are competing with Indian workers and Indonesian workers. So we are complimentary; we rely on each other. The sooner the policymakers recognized that, the quicker we can focus on our real well-being instead of politics.

U.S. consumers will probably not be the driver of the global economy the way they were for so long, so we need other drivers. Chinese consumers are welcome to spend more money, too.

Derek ScissorsResearch Fellow for Asian Studies Center: A 20-percent exchange rate revaluation does not do anything [to reduce a country's trade surplus]. Look at the Japanese case. Did the 20-percent appreciation change their trade? No. Trade surpluses are not useful for anything. What you want is to bring wealth to your people.

Japan is the old man of Asia. China is the middle-aged man of Asia, and India is the young man of Asia. India's economic growth will pass China in the next 10 years because it is a younger country. But this does not mean India is a successful country. When you age in the young society, you have to change the ways the economy grows. Japan did not. China has to go from absorbing labor surplus to better education and use more effective labor.

The challenge for China is to move from an export-oriented, job-creating economy to an efficient and domestic-oriented production economy. It takes a long time to fix.

(Reporting by Chen Wen and Liu Yunyun from Washington, D.C.)


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