March 18, 2011

 

The China Syndrome

Manipulation of the yuan costs America 900,000 jobs. So why are Republicans stalling efforts to do away with the practice?

by Josh Harkinson | Mother Jones

A 10-yuan note (photo courtesy Jason Wesley Upton/Flickr)
Campbell Fittings, a maker of precision screws and couplings used by petrochemical, mining, and construction companies, is nothing if not efficient. A typical employee in its factory in Boyertown, Pennsylvania, supervises two machines that each stamp out a new screw every 12 seconds. Yet its Chinese competitors sell nearly identical screws in the US for at least 40 percent less — well below what Campbell pays for raw materials. It's no secret why: For years, the Chinese government has kept the yuan trading at 40 percent below its true market value, making its exports that much cheaper. "I can fight companies," says Joe McGlynn, Campbell Fittings' vice president. "I can't fight countries."

The company's 75 workers aren't the only ones getting (ahem) screwed over by what is effectively a huge subsidy for China's manufacturing sector. "Chinese currency manipulation is the single biggest reason why so many Americans are still jobless," says Peter Morici, a University of Maryland business professor and former chief economist with the US International Trade Commission. Eliminating the practice, economists estimate, would boost American exports by $125 billion a year and create 900,000 US jobs. "The Chinese have figured out that this advantages them even though it's unfair," Morici says. "And they are not going to change it until we take action."

For the complete article, go to http://motherjones.com/politics/2011/03/chinese-currency-manipulation-nam

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