Chinese President’s Visit: A Real Hu-Done It

By April 19, 2006Trade

Chinese President Hu is visiting Washington tomorrow, for meetings with President Bush and other high officials. The big question is whether he will make a declaration that China will allow its currency to revalue, or whether the meetings will just be one big yuan. Hu knows?

There have been a few tantalizing hints, so we’ll see. Lower-level Chinese officials agreed to remove some thorny trade barriers last week, and we hope that positive attitude will be carried forward tomorrow by you know Hu.

China’s $200 billion surplus with the United States (estimated to grow to $250 billion this year) is creating a huge distortion in trade, as is China’s rapidly growing surplus with the whole world. Low labor costs and other advantages are one thing, but a deliberately undervalued currency that so far has been obtained at the cost of China purchasing nearly $1 trillion of U.S. dollars, is another. Not good for China either, to have all that money tied up in low-interest U.S. government securities rather than putting it to work raising the living standard of the huge poor areas of China. China needs to shift from export-led growth to domestic-led growth not just for a smoother trade relationship, but also for the sake of its own economy.

China’s president is the lead item in the Hu’s Who of China, and lets hope that he is the lead item in cooperating with President Bush so both of them can agree on steps that will close the yuaning U.S.-China trade gap.

Join the discussion One Comment

  • I don’t think we will see any real movement in the Yuan. I just read somewhere that China doesn’t even have much of a trade surplus if we were to exclude the United States.