The US–China Trade Dispute

The US–China Trade Dispute

Facts, Figures and Myths

Imad Moosa

While the Americans accuse China of damaging their economy, the Chinese claim their policies are legitimate and that the US has no right to dictate how the Chinese economy should be run. Imad Moosa addresses contentious issues including: whether the Chinese currency is undervalued, whether the undervaluation of the yuan, should it exist, is the cause of the US trade deficit with China (hence revaluation being a justifiable cure) and whether Chinese economic policies are immoral and illegal according to IMF and WTO rules.

Preface

Imad Moosa

Subjects: asian studies, asian economics, economics and finance, asian economics, international economics, money and banking

Extract

The US is accusing China of playing a “dirty game” involving currency manipulation and mercantilism, claiming that these policies have created the massive bilateral trade deficit and destroyed America’s manufacturing industry. China is also accused of causing the global financial crisis, impeding the recovery of the world economy from the great recession, perpetuating higher oil (and copper) prices, aggressively buying up the corporate world, and threatening American security. These unsubstantiated and exaggerated allegations are typical products of the blame-it-onforeigners and do-as-I-say culture. Furthermore, the US is ambivalent towards China’s accumulation of foreign reserves (mostly US Treasury securities). China’s accumulation of reserves is taken to be indicative of an undervalued currency and a threat to the US; meanwhile America is apprehensive about the possibility that China may stop buying Treasury securities, effectively cutting America’s credit lines. As a result, China finds itself in a classic damned-if-you-do, damned-if-you-don’t position. Just before the completion of the manuscript in September 2011, I was visiting the Beijing Institute of Technology where I presented a paper on why revaluation of the yuan will not work. The visit was rather informative with respect to some of the issues addressed in this book. The claim that the Chinese do not spend enough gave me a different impression from what I saw: luxury cars, busy restaurants and bustling shopping malls. I also found out how generous the Chinese are with guests. Generosity and not spending do not go together. The Chinese, I would say, spend adequately while striking a...