China’s play with money seen as threat

Bob Moon Mar 16, 2010

China’s play with money seen as threat

Bob Moon Mar 16, 2010


Kai Ryssdal: One country trying to control the value of its currency is really nothing new. The United States has, after all, been flooding global money markets with greenbacks for more than a year now. Of course that was to stabilize the financial system. An arguably positive thing.

Today some members of the United States Congress accused China of a more nefarious plot. Not for the first time, they accused Beijing of keeping an artificial lid on the value of its money. Thus boosting Chinese exports and making it harder to sell our goods there. They propose stiff penalties on countries that are engaging in unfair currency manipulation. But why should we care? Sounds like a job for our senior business correspondent Bob Moon.

BOB MOON: We found the owner of a machining operation outside Flint, Mich., who’s directly affected.

Laurie Schmald Moncrieff runs Schmald Tool and Die, and says it’s not just cheap Chinese labor she has to deal with — it’s getting past the lopsided cost of steel or aluminum.

LAURIE SCHMALD MONCRIEFF: We can’t even buy the material for the price that they’re selling product for. Before I even put any labor, before I even put any cost into that raw material, I’m already too expensive.

She complains the Chinese government is essentially subsidizing its exports by keeping its currency value low. And until our government deals with that, she says, it needn’t waste its time with hiring programs.

Fred Bergsten heads the Petersen Institute for International Economics. He says there’s no question the Beijing government knows what it’s doing.

FRED BERGSTEN: What they do is buy dollars and sell their own local currency, renminbi. That keeps the dollar exchange rate strong, it keeps their own currency weak, and that distorts trade flows by cheapening Chinese exports, and raising the price of imports from the United States coming into China.

Some critics warn that responding with tariffs could trigger a protectionist tit-for-tat. But Bergsten says the U.S. and its allies have tried to reason with Beijing.

BERGSTEN: If China continues to be recalcitrant, and imposes its own hugely protectionist device of an undervalued currency, then I think it’s up to other countries to defend their own interest.

In this game that all countries play, President Obama did seem to be open to some kind of new tactic when he spoke last week to the Import-Export Bank.

PRESIDENT OBAMA: We need to secure our companies a level playing field. We need to guarantee American workers a fair shake. In other words, we need to up our game.

Lawmakers say support for some kind of action is so strong they expect quick passage of their bill to slap duties on certain Chinese exports.

I’m Bob Moon for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.