China Accused of Keeping Yuan Artificially Low

Many Western economists believe China's currency is undervalued by as much as 40 percent, giving it an unfair advantage in world trade by effectively subsidizing its exports while putting a de facto tax on imports. The reason behind this accusation is because western countries, particularly U.S, lost much of it's economy due to outsourcing to other countries with cheaper labour. And China is at the top of outsourcing list due to it's massive and cheap human resource. In the principle of free trade (where minimum regulation allowing free development of trade) which is being preached and upheld by the U.S seems to be somewhat hypocritical. For decades U.S has been leading the world economy but now to gradually loosing to China which will become the next economy powerhouse makes them feel redundant.

In the past few months, U.S has been pushing China to re-value their Yuan but to no avail. China claims that re-valuating their Yuan is a matter of internal matter and they will only do so if they are sure their economy will not be affected. According to Chinese spokeswomen Jiang Yu at a regular press briefing "Using the [yuan] exchange rate issue as an excuse to engage in trade protectionism against China can only harm China-US trade and economic relations, and will have a negative effect on both countries' economies and the world economy." This form of trade-protectionism comes in a bill that has been voted through by the US House of Representatives. However as of now it still require the Senate and presidential approval. This bill if becomes law, will allow the US Commerce Department to impose tariffs on Chinese imports, if it deems the yuan to be "fundamentally undervalued". Sounds like an intimidation which is all too common for the U.S to employ to beat any country into submission. But then China is not to be trifled with as they claim that such a law is against WTO law according to Yao Jian, a spokesman for China's Ministry of Commerce. From the looks of it U.S has clearly make their intention clear and in such case WTO might not agree with them. This move by the U.S has shown an act of 'unfairness'. No matter whether the bill has been passed or not, U.S will still lose since China is currently their fastest growing export market. Cutting off one of their main economic trade is not a wise move, even if is to preserve some form of ego. Western countries affected by the economic slowdown should at least consider taking a step back to reevaluated their policy. Laws should be done for the best of the people (protection and deterrence), not to attack and intimidate. U.K government has been doing a good job in attempting to fix the economy, thought the moves are ugly (like sawing off an infected limb to save a life) but at least they did not point fingers. Kudos.