Word: china
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Dates: during 2000-2009
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Obama arrived in Beijing Monday, but don't expect anything to get resolved. The U.S.-China economic relationship has become way too complicated and contradictory for simple solutions. (See pictures of Obama's trip to Asia...
Within the U.S., the imbalance is mainly seen as the product of protectionist policies by China, in particular China's refusal to let its currency, the yuan, appreciate against the dollar. There's certainly something to this - it's now universally agreed just about everywhere but China that a freely floating yuan would be worth significantly more than the 15 cents it currently goes for. By keeping its currency's value artificially low, China makes its products cheaper in the U.S., thus encouraging imbalanced trade. (See a story about China's consumers and the world economy...
...when China linked its currency to the dollar in the early 1990s, it was out not to create trade surpluses but to carve out a bit of stability in turbulent global currency markets. During the emerging-market currency crises of 1997 and 1998, China's success in keeping the yuan fixed at 8.3 yuan to the dollar was applauded in the West as a major contribution to averting financial chaos. Since 2005, China has been willing to allow the yuan to appreciate a bit (the current exchange rate is 6.8 yuan to the dollar). It just hasn't been willing...
...China, meanwhile, it is fashionable to blame U.S. trade deficits on the debt-addicted ways of American citizens and their government. There's an element of truth to this too. If the U.S. borrowed and spent less, its trade imbalances would be smaller. But China has been enabling this profligate behavior for years by buying trillions of dollars in U.S. government debt and mortgage securities as part of its continuing effort to - you got it - keep the yuan from appreciating too much against the dollar...
...1990s with Japan, which accounted for the bulk of the U.S. trade deficit in those days. The trade deficit with Japan never shrank much in dollar terms, but it became smaller as a share of GDP starting in the mid-1990s, and was eclipsed by the trade imbalance with China in 2000 (in September the U.S. trade deficit with Japan was $4.1 billion, compared to $22.1 billion with China). The issue was never resolved, but it ceased to seem so important. Could that happen with China...