The trade deficit between the U.S. and China is growing, aided
by an artificially low Chinese yuan to U.S. dollar currency rate.
Washington is pressuring Beijing fix its currency peg, which would
allow the yuan exchange traded fund (
) to appreciate more.
However, Fan Gang, an economist and former government adviser,
comments that a "renminbi appreciation may not have a big impact,
or an impact at all" on the American economy,
reports David Leonhardt for
The New York Times
. The renminbi has strengthened 21% against the dollar from 2005 to
2008, but the trade deficit is still growing. [
China ETFs: Plays for the No. 2 Economy.
A stronger Chinese currency could help
China's citizens consume more
, raise the country's standard of living and help the rest of the
globe produce more.
If a quick currency exchange rate fix did occur, cheap labor
that used to be found in China would only move to cheaper southeast
Asian countries, which wouldn't help reduce the country's trade
ETFs Waver on Tensions in China.
The only credible threat Congress may offer is tariffs to force
Beijing to allow its currency to appreciate. So far, the Chinese
currency has strengthened 1.6% since 2008, and most of that was in
the last two weeks.
For more information on the Chinese currency, visit our
Chinese yuan category
Market Vectors Chinese Renminbi ETN (NYSEArca:
WisdomTree Dreyfus Chinese Yuan (NYSEArca:
Max Chen contributed to this article.