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Jay McIntosh

China currency issue takes a back seat

April 5, 2010

It looks like those furniture importers were on to something when they said they didn’t expect anything dramatic to happen to the value of China’s currency anytime soon. This past Saturday, the U.S. government said it was delaying a report that could have spurred more debate, if not action, on the issue.

People watching the situation were anxious to see if the Treasury report was going to label China a “currency manipulator.” That apparently is strong language that can lead to other steps. Some U.S. critics think China keeps its currency valued artificially low, which enables it to sell more imports to fuel its fast-growing economy.

The trouble is that calling them “currency manipulators” would tick off the Chinese, who apparently do not appreciate friendly suggestions from outsiders on how to run their government.

According to a New York Times story, the currency case is one of many issues that divide, and unite, our two great nations. A couple of other hot-button issues are seeking tougher sanctions on Iran and pressuring North Korea to cool it with their nuclear weapons. U.S. officials seem to be indicating that backing off on the currency exchange rate for a while is politically expedient.

Even with a stable exchange rate, one big Chinese furniture manufacturer said, there may be upward pressure on pricing this year from raw materials cost increases. Watch for more on that.