China Relents on the Yuan

By July 22, 2005Trade

“American manufacturers and labor unions hope [China’s currency] change will help U.S. factory sales and jobs…The National Association of Manufacturers, which long has lobbied for a get-tough policy on China, greeted the announcement as vindication. ‘While the initial 2.1% revaluation is inadequate, we view it as the beginning of what should be a significant revaluation,’ said John Engler, the association’s president.”

Wall Street Journal, July 21, 2005.

Yesterday was a pretty big day for the NAM. After more than two years of leading the charge on trying to get China to stop manipulating its currency, the Chinese government announced yesterday that it was at last going to “un-peg” the yuan from the dollar. For nearly a decade, the rate has been pegged at about 8 yuan per dollar. This starts China down the road toward a freely floating currency – set by the market as it should be – but they’re not there yet by any means. This is only a step, a small step, but in the same breath also a very large step for today the anchor was lifted, the Rubicon was crossed and the process of moving toward a market-based currency for China has begun. Here’s a link to our press release, expressing simultaneous satisfaction and caution.

This is just a great day for American manufacturers and the NAM. We’ve been at the forefront of this issue for so long, just pushing, pushing and pushing – what it takes to get things done on the international scene.

Again, this isn’t over, but it’s a very important beginning and manufacturers large and small should be proud of what they’ve wrought, for it was large and small manufacturers across this country that have carried this message about the undervalued yuan for years. Today, it began to bear fruit.

As we’ve said so many times before, we will compete with anyone, because we are the best manufacturers in the world, but China ought not to have any unfair advantages.

By the way, just a reminder for those who are impatient with China’s pace: it took 7 years for Congress to pass the class action bill. Maybe China’s move will embolden Congress to move forward on the rest of the manufacturing agenda.