Renminbi ad absurdum

by Don Boudreaux on February 17, 2010

in Myths and Fallacies, Trade

The U.S. government argues that China unjustly benefits itself by keeping the yuan undervalued.

If this argument is correct, why doesn’t Beijing arrange for the yuan’s value to be even lower – say, $0?  If the Chinese were simply to give yuan to Americans, Americans’ demands for Chinese exports would soar even higher.  China’s export industries would boom even more magnificently.  And presumably (according the logic of Uncle Sam’s argument) the Chinese would prosper even more splendidly, if more unfairly, at the expense of Americans.

Because the Chinese don’t give the yuan away for free on foreign-exchange markets, do they reveal themselves to be really not so clever and financially savvy after all?!

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