China Appears Set to Make Currency Policy More Flexible

HONG KONG — The Chinese government is preparing to announce in the coming days that it will allow its currency to strengthen slightly and vary more from day to day, a move being taken for domestic policy reasons in China but likely to please the Obama administration, people with knowledge of the emerging consensus in Beijing said on Thursday.

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A more market-oriented currency policy in Beijing, with a trend toward a stronger renminbi, could help the American economy in several ways, according to economists. A stronger renminbi would make Chinese goods more expensive in the United States and make American goods cheaper in China, which is currently exporting more than four times as much to the United States as it imports.

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27 Responses to “China Appears Set to Make Currency Policy More Flexible”


  1. 1 Christopher Henderson April 12, 2010 at 7:50 AM

    Hmmm, not sure I understand how this helps the US. If it makes products from China more expensive to us, and American goods less expensive for them, wouldn’t that not help us? Seems like China would get more out of it since they are exporting so much more. If they importing four times less than what they’re exporting, shouldnt our goods be more expensive? This confuses me. I’m also unsure how currency value varying day to day is a good thing. Seems like this would bring up the concept we just learned in chapter 12; menu costs. I know that’s a cost of inflation, but wouldn’t it be similar if the value is changing so constantly. Perhaps I’m just not understanding this article correctly.

  2. 2 Jesus Zavala April 13, 2010 at 7:55 AM

    I think that if the Chinese currency appreciates, this would help the U.S. in many ways. Since China is exporting more than importing, this would help U.S. prices to lower in China. This would help the U.S. because since the prices are lower, they are now able to compete with other couuntries for customers in China. The appreciation of the Chinese currency would also help China’s inflation problem. What I still dont understand is how the U.S. pressured China to change its currency policy, rather than China done what was best for its own economy.

  3. 3 mike April 14, 2010 at 10:09 AM

    How does this help the U.S. exports? China does not import much from the U.S. I gather. By making Chinese goods more expensive, the U.S. might not import as much but there seems to be quite a reliance built up over the years on Chinese imports. Does the Obama administration think that this will produce jobs here in the U.S. that would have been done by the Chinese in manufacturing/producing goods? This seems like such a broad statement without a lot of information. I don’t understand how a trend towards a stronger Chinese currency on a day to day basis is going to make much of a difference.

  4. 4 Dante Sanchez April 14, 2010 at 1:35 PM

    Manufacturing in the U.S. has been down for awhile, making american good cheaper would in theory make exports go up. But theoretically how much would the renminbi have to go up in value to make even the smallest difference in our export quota? I suppose every little bit counts, but I feel the obama administration is making very little progress in with the chinese. A whole lot of cheering for an inch of progress is almost pathetic. I think the real question we should ask our selfs is what motive do the chinese have for such and announcement?

  5. 5 Ryan Haley April 19, 2010 at 7:20 PM

    Anything that will increase demand of American made products will help this economy a great deal not to mention the people living in it. Some of the benefits that come to mind would be an increase in jobs, A non negative GDP meaning we export more then we import. I wonder what benefits china is receiving for opening its markets to America? I mean I wonder what products they will start to demand from us more or less.

  6. 6 Anthony Azevedo April 19, 2010 at 10:00 PM

    China is controlling the trade markets. With the yuan being under valued, it makes China a stronger exporting nation. The dollar is not stronger than the yuan but with the way yuan is controlled, the dollar is stronger. China population will soon out number the USA, which mean China should be importing more items not exporting more. Population of China would live a better life by having higher standard of living. I’m not sure who would have the comparative advantage but if USA dollar fall lower than the yuan then they can buy more stuff from us. This would put more people to work here until a new balance is reached.

  7. 7 Angelina Hlavaty April 27, 2010 at 9:12 PM

    Im confused. So since China exports more than imports, why make goods cheaper for them to buy there and more expensive to buy here? I mean i feel like Adam Smith explains, government can interact in exporting and importing all they want, yet it is the invisible hand that will balance out equal trade. If this creats more jobs for China, great, that will increase in how much of our goods they purchase. With teh US being in a deficit and importing more than exporting it may be a good thing if China buys more of our stuff, yet based on what I read, it would seem it is a bad thing to make our purchases more expensive.

  8. 8 Evan Schlinkert May 2, 2010 at 1:53 PM

    it is great to hear that the American dollar could be strengthened with this policy, but to me the question becomes, would I like to have Chinese good be more expensive….probably not, to me the reason I buy Chinese goods is because they are so cheap. But I guess when you buy cheap that is what you get. Who knows it might also be good in terms of we might start to buy American made goods.

  9. 9 Charles McNeil May 2, 2010 at 7:12 PM

    I guess this is one of the benefits of having a popular president (thus far, Obama has the 2nd highest average approval rating since JFK according to wikipedia.org). I wish I understood with a little more clarity why China has such complete control over the strength of its currency. A benefit of communism I gather.

  10. 10 David Colin Sorenson May 3, 2010 at 9:46 AM

    By making our imports cheaper over there while they increase the power of the renminbi will increase our funds. If more people had more money to spend and there are more american goods coming in, you got to think that they would be all over our imports. But as the post before me, I don’t understand how they can make their money stronger or weaker. Well, I hope that by doing this China shows us some kind of light at the end of a tunnel.

  11. 11 Kara Yamamoto May 3, 2010 at 10:11 AM

    I’m a bit confused on how this helps the US. If china exports more then imports, why would we want to make goods cheaper for them? If it makes products from China more expensive for us to buy, and US goods less expensive for them, wouldn’t that be benefitting China not us? They are importing so much that we shouldn’t need to lower our prices of trade with them.I’m also unsure how currency value varying day to day is a good thing. I know that’s a cost of inflation, but I guess I just don’t completely understand the article.

  12. 12 Nicole Hernandez May 3, 2010 at 8:16 PM

    I don’t really understand how it would help us out if American goods would be cheaper in China. You would think that they would be the ones benefiting from this, not Americans.

  13. 13 Hannah Mac Dula May 3, 2010 at 9:23 PM

    I definitely agree with Ryan on this one. Anything that increase the demand of our products would be quite benificial, especially in times like these. Also, I too wonder what China would get in return for open their markets to us! In addition, I wonder for what domestic policy reasons China is doing this. It is great that they want to help us out, but I’m sure they will get something in return form Obama somehow.

  14. 14 kelsea Jimenez May 6, 2010 at 8:42 AM

    I would also have to agree with Ryan and Hannah on this one. Like they said, being able to export more goods to China would definitely help our economy at this point. It shouldn’t matter if the goods are not going to cost more in China, but that more goods being exporting to China will help us receive more money to our country. But like Hannah said, since China is willing to help us out a bit, I wonder if they will be getting something in return?

  15. 15 Melissa Moylan May 6, 2010 at 8:16 PM

    Yes China helping America is good, but i am also wondering what they will want in return? I think it is great the US dollar will be worth more but is it really good for our government to rely on another country instead of trying to stabilize our own?

  16. 16 nicholas joy May 9, 2010 at 4:34 PM

    If this will increase trade i see it being a very good thing. Are imports are way to low so while it is dropping the price of our goods i see it having a long term beneficial effect.

  17. 17 Hyo Kim May 10, 2010 at 8:00 AM

    Recently, more and more countries are calling for a revaluation of Chinese currency, the Yuan. Why? Because the currency value is closely related to export. Assume that a Made-in-China stuffed animal is sold at 10 dollars in the US, which equals to 68 yuan at the current exchange rate. What will happen if yuan appreciates and the exchange rate between dollar and yuan becomes 1:5? The cost to make a stuffed animal in China won’t change because it’s measured in yuan, which means in order to make the same profit, the price should still be set at 68 yuan. However, when it’s exported to the US, its price rises from $10 to $13.6 (68/5=13.6) because of the change in rate. Therefore the Chinese product will be less competitive, which allows other countries, mainly developed countries, to gain more domestic jobs for their own people. If the yuan really rises in value, Chinese manufacturers will either choose to earn fewer profits or lose their low-price advantage.

  18. 18 Nick Baumann May 11, 2010 at 8:02 PM

    Before I read this article, I didn’t think about what would happen to American funding if the Chinese immediately let the yuan appreciate to its true value. The author did well to think about how China would stop buying American Treasuries. As much as I don’t like it, our economy is largely funded by Chinese money. We cannot cover our own expenses at present so we’d probably end up in more hot water if our primary creditor pulled the plug on us. I still support China in its decision to raise the value of the yuan, I just hope they continue to do so slowly.

  19. 19 Chris Hirst May 16, 2010 at 3:12 PM

    I dont really understand the full connection between chinas policies and our economy in this situation but i am ok with anything that will supposedly help out economy as long as it doesnt mean more federal spending and more ludicris taxing.

  20. 20 Justin Castro May 16, 2010 at 10:32 PM

    To be honest this article confuses me a bit. I don’t understand how any of this helps the United States. If China exports more than they import, it would not make sense for us to make goods even cheaper for them. It would only benefit China, because it would make products from China more expensive for us to buy, and US goods less expensive . They import so much that we shouldn’t have to lower our prices to trade with them. I am also confused why the currency value changes each day. It does not make sense how that could be a good thing. The most successful economies are the stable ones that can sustain growth and development in the long run.

  21. 21 Daniel Reddell May 16, 2010 at 11:08 PM

    This will lead to an increase in the demand for American-made products, which will help the American economy a great deal. As someone said earlier, with the increased demand for American goods, more jobs will be created as a result, and the US will have a non negative GDP (because it will be exporting more than importing).

  22. 22 Miles Atkinson May 17, 2010 at 2:39 AM

    The appreciation of the Chinese currency will benefit the inflation of China however, I’m still confused how this will benefit the US economy. Doesn’t this mean that the US imports will increase rather than exporting more?

  23. 23 amos mccray-goldsmith May 17, 2010 at 2:32 PM

    the fact that the government in china controls the fanatical system has been a plus in their economic rise, they have not had the same issues with banks as we have in america. and now that they are letting the market dictate their currency a little more is great news for us. hopefully it will stimulate our exports to china and thus help us here at home.

  24. 24 Jamie B May 17, 2010 at 5:17 PM

    Whats good for the U.S economy is good for the world. This is huge for the United states. Now are exports will increase because our goods are cheaper in china and it made chinese products more expensive so less of our money will be going towards are debt collector. Big win for united states, big win for most of the world.

  25. 25 Ibrahim Jamil May 17, 2010 at 8:57 PM

    China’s power in the economic market is strong. But i believe that this will raise American imports in china. Yes china does not import much but exports a great deal. Any demand now is very much welcomed.

  26. 26 Trella Chrisco May 18, 2010 at 7:27 AM

    i could see how this will help the United Stated economy alot. But what about China’s? what will happen to the people in thier country when they are going to have to pay more to export goods and then will have to pay more for goods that are imported? To all the lower paid workers in china in the sweatshops how can we say this is a good thing?

  27. 27 Alex Plascencia May 19, 2010 at 12:36 AM

    If the Chinese complete this policy, then the US will greatly have favorable outcomes in its economy. They export to us so much that we should beallowed to put tariffs on their exports. If the Chinese currensy changes too much then there will not be enough imports if we do not know how much we are goingto spend.


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