The United States has an ongoing trade and budget deficit of some $1 trillion out of its total economy of some $10.5 trillion; it has a foreign debt of some $6 trillion and I wonder what kind of despicable courage for the Bush administration to blame China for its weapon of undervalued currency against the dollar.

What is funny is that while China is experiencing a trade surplus with the United States in excess of $103 billion it is using its foreign reserves of some $346.5 billion to buy US treasuries bills to finance the United States deficit. If China was not buying US treasuries, or if it shifted its reserves to the Euro then interest rates would go up and the American economy could be going into a recession while at the same time, the dollar would further decline in value against major currencies.

Morgan Stanley economist Andy Xie estimates that more than $1 trillion of US market capitalisation depends on inexpensive Chinese imports. In fact for every $1 in product value China receives from exports to the United States, that same product is resold in the American retail market at $4 to $5. It is also important to note that China is expected to experience an overall 2003 international trade surplus of roughly $10 billion while the United States is expected to experience an overall trade deficit of some $500 billion.

We must also understand, contrary to the perception of American media, that the Chinese economy is more open than many other powerful countries and that its advertised communist dictatorial economic system is a fiction of the American Neo-Uber-Alles holed up inside the White House. Economist Nicholas Lardy, of the Washington, D.C., Institute for International Economics, has recently stated that "China's prices are market rather than state determined, most of its product markets are competitive and with the reduction of tariffs its economy is open." Another economist, Laurence Brahm, who lives in China, has stated in an interview he held with Asia Times "I do not think that China's state control over political and economic powers is any greater than, say, the US federal government's." Further, the understanding that China has an open economy is attested by the fact that China has become the largest Foreign Direct Investment recipient in the world in attracting $52.7 billion of the $143 billion invested worldwide in 2002.

I agree with the position that China has taken and it should not let its currency float before correcting the problems of its financial and banking system.

References

Pertinent articles published in Ensign

Wealth of economic articles collected by The China Study Group http://www.chinastudygroup.org/newspage.php

Lobe, Jim Bush Stance on Syria Hit Shows Neo-Cons Still Hold Sway October 8, 2003 Inter Press Service, http://www.commondreams.org/headlines03/1008-05.htm

If Americans Knew U.S. Assistance http://www.ifamericansknew.org/stats/usaid.html

Reuters US gross external debt more than $6 trillion October 8, 2003 http://www.forbes.com/home_asia/newswire/2003/10/08/rtr1103708.html

Crooks, Jack Politics, jobs and the yuan September 18, 2003 Asia Times, http://www.atimes.com/atimes/China/EI18Ad02.html

Koretz, Gene China Isn't Hijacking Jobs September 26, 2003 Business Week, http://www.chinastudygroup.org/newsarchive.php?id=2767

Dolven, Ben and David Murphy Riding Out a Storm. The barrage of criticism from the United States about China's currency policies is at best misguided. October 5, 2003 FEER, http://www.chinastudygroup.org/newsarchive.php?id=2846

McGregor, Richard China in danger of overheating, say economists October 8, 2003 Financial Times, http://www.chinastudygroup.org/newsarchive.php?id=2864

Balfour, Frederik Another Big Reason China Won't Revalue. Already awash in bad loans, its Big Four banks could go under if depositors bolt October 2, 2003 Business Week, http://www.chinastudygroup.org/newsarchive.php?id=2829