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.

Chapter 8: The Morality and Legality of Chinese Policies

Imad Moosa

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


THE CASE OF CHINA VERSUS THE REST OF THE WORLD: WHAT THE PROSECUTOR SAYS The list of accusations against China is vast and it is not confined to its exchange rate policy. China is accused of choosing an improper exchange rate regime, currency manipulation, refusal to revalue an undervalued currency, excessive accumulation of reserves, too much saving and too little consumption, violation of the IMF and WTO rules, causing global imbalances, hurting the world economy by adopting a policy of export-led growth, causing the global financial crisis, pushing up oil prices, buying the corporate world aggressively, and undermining US security. Even more accusations could be found, but this list is adequately comprehensive and bad enough. If convicted, China would be labelled a villain that is pursuing anti-rest-of-the-world policies. Both the media and academic literature report these accusations on a regular basis. For example, Ensinger (2010) argues strongly that “the US must be more forceful in tackling China’s currency manipulation, export controls, discriminatory domestic procurement policies and tradedistorting subsidies”. More specifically, he accuses China of (i) promoting industrial policies that manipulate trade rules to benefit domestic firms to the detriment of American and other foreign competitors; (ii) failure to live up to its commitment to transition away from a statedirected economy to a more market-based approach; (iii) using a “slew of trade distorting practices” to ensure that the economic relationship with the US is far from balanced; (iv) ensuring that it holds a surplus with the US through the manipulation of...

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