Source: http://www.nytimes.com/2007/03/13/business/13yuan.html
The US is placing pressure on China to take greater reforms towards its public policy and currency regulation.
China’s rising trade surplus with the United States has produced growing pressure in Congress in recent weeks, and the latest announcement is likely to feed the debate. Lawmakers have proposed steep duties on Chinese exports unless China takes immediate action to end government subsidies to industries and to allow its currency to rise faster against the dollar.
Analysts are contributing this increasing trade surplus to the soar in Chinese exports and a decline in its imports. It is simply cheaper to for China to manufacture and export than for the US. For this reason, the much debated outsourcing issue lies in that China has the comparative advantage to produce at the lowest labor cost, while it is more expensive in more industrialized nations such as the US. As the US imports much more than it exports to China, its trade deficit continues to grow. The US is thus being hurt by a trade deficit while China enjoys a trade surplus. At the moment, China’s economy seems to be growing stronger, while the US economy is being debilitated by the high impact of China’s growing exports. China thus has the capacity to influence and hurt foreign markets.
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