Chapter 11: Concluding Thoughts
MYTHS, FACTS AND FIGURES The title of this book is The US–China Trade Dispute: Facts, Figures and Myths. Throughout the ten previous chapters we came across numerous myths, facts and figures, some of which will be spelled out in this chapter. The words “myths” and “facts” are typically used in articles on the US– China trade dispute, but it is frequently the case that the proclaimed facts are actually myths, and vice versa. The transformation of facts into myths and myths into facts follows from the ideologically-driven desire to prove a pre-conceived idea – on this occasion the idea that China is indulging in wrong-doing. Some of the genuine underlying myths have been identified by The Economist (2007b); these myths pertain to the proposition that revaluation of the yuan will work. The four myths are stated as follows: 1. 2. 3. 4. There is overwhelming evidence that the yuan is grossly undervalued. China’s sharp increase in trade surplus is due to expansion in cheap imports. Imports from China destroy jobs and harm the American economy. Revaluation of the yuan will greatly reduce America’s trade deficit. The first of the four myths identified by The Economist is a myth because the evidence for the alleged yuan undervaluation is weak, fragmented and mixed. For a long time it was established that the yuan was undervalued because The Economist’s Big Mac index said so. Not any more: by modifying the Big Mac index to take into account the effect of per capita income,...
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