Hu in the White House  

rm_silkditty 67F
12408 posts
4/20/2006 2:34 pm
Hu in the White House

Maybe it's just me, but it seems pretty monumental that China's leader is visiting the White House.

Economics have never been my strong point, so there's something I don't get.

So, America feels that the yuan is undervalued, and one of the negotiations centers around getting China to "allow currency to rise with market forces."

I'm totally lost here. How/why would a country choose to undervalue their currency?

Any explanations are welcome!

lovingfun50 67M

4/20/2006 5:05 pm

Hi silkditty,
I believe the answer is that with the under valued yuan, the goods they manufacture there are less expensive for country's like America to import....hence the $200 billion dollar trade deficit we have with China. Of course part of the problem lies in the wage differential between the two countries....but if wages WERE equal their goods would still be cheaper due to the undervalued currency.

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