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philosopher's avatar

What should the United States and the world do about the fact that China devalues it's currency?

Asked by philosopher (9165points) April 5th, 2010

I think we must manufacture more in America and we must export more.
If you are interested see this link.http://yglesias.thinkprogress.org/archives/2010/03/chamber-says-it-cant-protect-china-from-protectionist-backlash-if-it-doesnt-readjust-its-currency.php
You can goggle this for more information.

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35 Answers

Captain_Fantasy's avatar

We need to actually manufacture something as Americans instead of being consumers.
What was the last thing you bought that said “Made in USA”?

Lve's avatar

I don’t think there is much we can do about it other than stop buying all that Made in China crap.

philosopher's avatar

@Captain_Fantasy
I try hard to buy things made in the US; occasionally I find something.
I agree with you we need to make things here.
I think perhaps we should block some of their imports.
I remember a time when China was in debt to the US; and everyone new their things were junk. Many of their imports are still junk.
We should be creating alternative energy in the US. We should be leading the way.

CyanoticWasp's avatar

There isn’t much that can be done about a country that devalues its own currency the way China does. What we have to be patient enough to wait for is for the Chinese themselves to wake up to the fact that their currency is undervalued and demand more parity from their own government. The Chinese leadership does the devaluation quite deliberately and strategically in order to spur exports (over imports), and until a majority of Chinese citizens start to move into more of a middle class mindset, that’s probably not going to change right away.

njnyjobs's avatar

You can manufacture all the stuff you want in America by Americans, but will never be able to compete in the world market with China and other cheap-labor countries when the consideration is price. There have been stuff that earned the Made in the USA seal, but turned out to be made by immigrants in some sweatshops in NYC. They were able to drop the price on those items but they didn’t last long. You know what happens when an enterprise can’t compete in the market, they fold-up and go out of business. That’s the reality of the American manufacturing industry.

In order for an economy to flourish, goods need to be consumed, breakdown or fall apart. Manufacturers continue to make them so consumers can have something to buy. If you make an item too durable, then once you have served everyone once, it’s time to pack-up the business.

What the US should do is to develop specialty products that the world will want but cannot create for themselves. It should be affordable, easily mass-produced and distributed worldwide.

Captain_Fantasy's avatar

Too many Wal*Mart shoppers keep Chinese imports in high demand. I think most people in America are unwilling to boycott Chinese made products.

CyanoticWasp's avatar

@njnyjobs we actually do a lot of that, you know.

Contrary to what you hear in “balance of trade” news reports that show how badly we are doing, the US has a very strong manufacturing position vis a vis the rest of the world. We export a lot of stuff (tons and tons, in fact, if you’ll pardon the obvious pun).

The US does very well with machine tools, agricultural equipment, raw materials including lumber, paper, unrefined and processed food, all kinds of heavy industrial equipment, aircraft and other aerospace goods, and, of course, armaments and other military gear.

So we don’t manufacture so much in the way of cheap and throwaway consumer goods as China (although we do tons of that, too)—so what? If you want to get into those markets, there are relatively few barriers to entry; have at it.

ragingloli's avatar

If you can not compete with prices, compete with quality. Make the label “Made in the USA” an asset.
Germany was global export leader until 2009 when China overtook us. And we did not have that leadership for nothing.

njnyjobs's avatar

@CyanoticWasp you’re right, but those you mentioned are high-ticket items that don’t get repeat business as much as you want to. And you expect that the people behind the manufacture of those items get the big paychecks, not your average joe who’s taking in a few dollars above the poverty line. Compare those to the throw away shirts and shoes that China and the rest of the cheap-labor countries dump in the US under the guise of well-know designer brands . . . things that get replaced when the seasons turn . . . just look at apparel and other fashion related products.

CyanoticWasp's avatar

@njnyjobs I know it’s always dangerous (for me) to bring up Adam Smith in discussions of this type, but his words from over two centuries ago are still true: “comparative advantage”. Some countries, and some areas of some countries, have relative advantages over others in production of one kind or another. For now, China’s comparative advantage is “cheap labor”. If When the Chinese become as relatively rich and well off as North America, Western Europe and Japan have been, then they may choose to become net consumers instead of net producers, too. Then they will be the ones looking for cheap labor to produce the things they want to buy.

If our own national wealth has been reduced enough (although that’s not going to necessarily be an inevitable byproduct of Chinese or “other” success), then perhaps the comparative advantage for “cheap labor” will swing our way.

Let’s hope that doesn’t happen. But consider that several thousand years ago the Chinese were in the forefront of technology, power and wealth… and lost that status to become today’s go-to source for cheap stuff to fill up Wal-Mart.

njnyjobs's avatar

@CyanoticWasp… indeed it sounds amusing the way Wal-mart is stuffed with cheap imports, but the reality is the jokes on the Americans who can’t shake off the addiction for “cheap crap”.

loser's avatar

Goggle?

Idknown's avatar

@CyanoticWasp hit it on the head. Once the Chinese citizens go on a spending sprees, they will change policy. China today has an elite upper class, and a very much larger poverty class.

Till things improve on that front – we won’t see any demands made by the citizens.

China might increase the value of the currency based on boycotts though. I mean they used to be pegged to the dollar directly – aren’t they now pegged to a ‘basket’ of currencies? One of the reasons why the Hong Kong dollar is now weaker.

wonderingwhy's avatar

China’s currency won’t appreciate until they open it up, but they won’t do that until they feel the costs are manageable. They have begun working towards that (for ex. the gradual strengthening against the dollar since 2005, asian exchange agreements, etc.) but until then the US must reduce its deficit, convince citizens to increase personal savings and, while we’re at it, promote increased chinese domestic consumption (as @CyanoticWasp mentioned). It also needs to be done quickly, before the US economic recovery picks up steam, otherwise our deficit to them will increase (quite rapidly I suspect) and their exposure from internationalization of their currency will increase along with it, requiring greater adjustments in valuation and therefore greater market instability.

@Idknown yes, they’re now in a managed float against a bunch of currencies, US dollar included.

UScitizen's avatar

Since we have no control over what other governments do with THEIR currencies we should focus on cleaning up our own financial mess. The first step would be to eliminate the cause of our most recent financial mayhem, the Federal Reserve.

CyanoticWasp's avatar

@ragingloli nope. @UScitizen said the Fed, and he was correct in what he said. “Banks” and the failures we saw with “the banking system” recently were not the cause of their failure. Not the primary cause, anyway. As with most large scale failures of economic systems this was mostly government-induced. But you and others with your distrust or outright hatred of private enterprise want to think that it was a market failure or a conspiracy of banks to steal your money (and the government that’s at fault won’t attempt to disabuse you of that idea… since you want to give them more power to “fix it” so it won’t happen again) ... and that guarantees that it’ll happen again.

SeventhSense's avatar

@ragingloli
I agree. There have been many times in the past and there are still more than a few industries that have shown Made in the USA can mean quality items. The difference though between Germany and China though is that at least Germany is exporting quality. China is just flooding the world with cheap items.

CyanoticWasp's avatar

Regarding “cheap shit from China”:
Many of the readers on this board are too young to recall when “Made in Japan” was a symbol for dreck, schlock and trash, around the 1960s and into the 70s. McDonald’s Happy Meal toys and that sort of thing. The first cars we imported from Japan were absolute trash—the Yugo had it all over them.

And then… within about 15 years, they were eating our lunch. We started reading books about Japanese management and quality circles. Predictions in the 1980s were that the Japanese would take over all of the top international banking slots—“nobody was as good as the Japanese”. Well… times pass.

China will go through a lot of that, too.

njnyjobs's avatar

@CyanoticWasp… the Yugo was a Japanese car?... you must have your countries crossed…

CyanoticWasp's avatar

@njnyjobs you must have missed my meaning. I know where the Yugo originated; no, of course Yugoslavia is not Japan. My point was that the Yugo, bad as it was when it was introduced here, was far better than the first Japanese cars we saw.

SeventhSense's avatar

@CyanoticWasp
That was also a generalization based on a lot of prejudice as well. Many Japanese industries such as toys, along with Germany and the US were second to none.
I sell a lot of vintage toys and many of the Japanese Toys of the 1950’s-60’s were superior to much of what was produced elsewhere including electronic battery operated toys. The difference in the quality and integrity of the Japanese toy from the 1950’s- 60’s compared to the later Taiwan and China toys was night and day.

CyanoticWasp's avatar

@SeventhSense I’m sure that there was a fair amount of that; it’s pretty common worldwide. That’s one of the myths that some will make up when their jobs are threatened by imports (the same argument that many Japanese still make today, for example, regarding a lot of American food products—because the Farm Lobby in Japan is one of the strongest in the country). But I saw a lot of trash first hand—including that damn mid-1970s Toyota that wouldn’t even start in the summer time.

Not everything we get from China now is “cheap junk”, either. (See the second sentence in the paragraph above.)

SeventhSense's avatar

@CyanoticWasp
Yes. I think more importantly than the goods themselves is China’s politics. If we didn’t have this massive trade they would just be another Iran. In fact they are really worse and it’s really a shame that we do business with them at all.

UScitizen's avatar

@CyanoticWasp I wish there was a level above a GA. Your answer above deserves “Greatest Answer of all time from someone who actually understands what happened, and is still happening.”

mattbrowne's avatar

I buy more durable stuff whenever possible. It’s more inexpensive long term and better for the environment.

philosopher's avatar

@mattbrowne
I buy American when I can find American and if I can afford it. I prefer American clothing but finding any is a time consuming challenge.

SeventhSense's avatar

@philosopher

American Apparel made in L.A.
Plus the best butt in the world contest. :).
I love their t shirts.

philosopher's avatar

@philosopher
I have not seen those TV shirts in years. Where can I buy them?

SeventhSense's avatar

@philosopher
I suppose you are talking to me and not yourself. :)
You can buy them at the linked web site and I’ve also bought them on eBay.

mattbrowne's avatar

Buying local makes sense in many cases, especially when it comes to food. But sometimes there are superior products from other countries and it can make sense to buy them.

philosopher's avatar

@mattbrowne
I have no problem buying from other democracies that buy American products too.
I think we should treat other nations as they treat us.
I think we should stop the important of cheap junk and make things here again.

Idknown's avatar

@philosopher

“I think we should stop the import ant of cheap junk, and make things here again.”

Talk to me when you’re willing to take on a job for $3/hr. Or when your friends and family are willing to pay $50 for a fruit of the loom shirt. Or when the corporations decide that they don’t need to charge $20 for a $2 shirt.

Something’s gotta give – which is it?

Idknown's avatar

And for the record – since in college this ignorant girl was talking about how the poor Chinese people make $3/hr – they don’t. They make about $10/hr which translates to about $1.20 USD. But in their country – that’s still $10. If they buy Chinese goods, $10 is a good wage. Try to buy American… Scoop of HaagenDaaz? $70. I’d say it’s a bit hard for them to buy ‘American’.

Blame it on the Government though. If the value of the Yuan appreciates, the price of that scoop might become $40… you know – if you’re into $40 scoops of ice cream. Ballers.

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