Improving Productivity Even As Yuan Rises

By December 17, 2007Trade

USA Today examines China’s exports, staying affordable despite the (modest) rise of the yuan:

Treasury Secretary Henry Paulson’s inability last week to persuade China to accelerate the rise in its currency value was no surprise. The latest economic summit between the two trading partners was never expected to achieve a breakthrough on the exchange rate, which U.S. manufacturers complain gives Chinese products an unfair edge in world markets.

What is a surprise is the impact of the yuan’s gradual rise over the past two years: almost nothing. “Certainly, we have not seen the price increases from China that we were expecting,” says Frank Vargo, the National Association of Manufacturers’ vice president for international economic affairs.

Since July 2005, when China began allowing the currency to rise against the dollar, the yuan’s value has increased 12%. That should make Chinese products more expensive for customers paying with dollars. But over the same period, the prices of Chinese imports have risen by less than 1%, the Bureau of Labor Statistics says.

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