U.S. puts mounting pressure on Chinese monetary policy to encourage floating currency


75th U.S. Treasury Secretary Timothy Giethner under the Obama Administration

The Chinese economy largely relies on exporting manufacturing goods to other economies like to the U.S.

The Chinese government designs its monetary policy to essentially peg its currency, the Yuan, to ensure a stable value that would hedge against appreciation in order to give the country a competitive advantage in the global market place when it comes to exports.

Pegging its domestic currency against a government set policy, instead of allowing the currency to float in the international markets, distorts the real fair value of the currency and continues to help fuel future economic growth in the country from increasing volumes of exports by saturating markets with its cost-competitive goods.

Developed nations, including the United States, have largely criticized Beijing’s monetary policy, arguing it is unfair to nations that allow their currency to float which could cause appreciation.

U.S. Treasury Secretary Timothy Giethner said today at a speech delivered at the Brookings Institution, that there is a dangerous economic threat when nations collude to keep their currencies from appreciating. He went on to say it is unfair to countries that have floating rates, and that nations that keep their currency undervalued could face further challenges as economies they rely on to export goods are saving more and more amid intensifying economic volatility. Additionally, when one nation keeps its currency undervalued, it encourages emerging economies to do the same in order to maximize net exports, at least in the short run.

A new U.S. bill introduced to Congress would add new duties to Chinese-made goods, effectively making them more expensive.

The new legislation would only apply to goods deemed unfairly priced relative to domestic substitute goods manufactured in the U.S.

Ahead of the last G20 meet, which took place in Toronto, Canada, Beijing said it would make changes to its policies that should see at least some marginal appreciation of its currency.

To date, that has not happened, and the Yuan is believed to be undervalued by about 40-percent.

tag TAGS:
Short URL: https://business2press.com?p=7792
b2p Ensure that you follow us on Twitter and Like us on Facebook
Hercules holds a B.Comm Finance from Ryerson University in Toronto, Canada. He is a Chartered Financial Analyst (CFA) level 3 candidate. He was previously a contributor at FiLife, a finance website owned by Dow Jones and IAC. Write to [email protected]
We are perfectly committed to the highest ethical and professional codes of conduct and standards in the industry on a firm wide basis. Learn more about us, our contributors, and our governance
We encourage you to comment. Comments are moderated. Comments that are abusive, off-topic, have marginal substance, or include promotional content will be removed. We cannot facilitate requests to edit or remove comments, or explain moderation decisions

Business 2.0 Press publishes exclusive business tech news and analysis covering start-ups to large-caps from Bay & Wall streets since 2008 from a group of highly knowledgeable industry professionals that abide by the toughest industry codes of conduct and professional standards lightMore

lightAdd value by subscribing (RSS)


StockFractions.com has the most stock ratios for public companies. Get the most comprehensive micro insight on public firms available on the web, all for free.
Stock Fractionsgo


Colon cancer is one of the leading causes of death. Irrespective of family history, everyone is exposed to the risk. About 90% of colon cancer cases begin from non-cancerous tumors, polyps, which could form in the large bowel. Screening with a colonoscopy will painlessly remove any polyps hence almost entirely reducing your risk of developing the horrible disease. The good news is that about 90% of colon cancer cases are preventable through a simple (yes, simple) colonoscopy.
Learn moreatom
Public service message from Business 2.0 Press