Will Obama’s China bashing work to mend Dollar-Yuan parity?
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Obama's burst out against China
China undervalues Yuan for export gains
US President Barack Obama has lashed out at China over the undervaluation of the Yuan. Obama’s allegation is true and his lashing is justified. China is deliberately undervaluing its currency Yuan in order to dump its goods into USA. In America, you go from California to Florida anywhere, enter a shop and buy, say, a toy. The odds are that it will be printed with a ‘made in China’ label. Take for example plastic items. China exports its plastic items, undercutting the exports of other countries like India through artificial devaluation of its currency. 55% of its invoices are made in US dollars, 30% in Euro and the rest 15% in Pound Sterling. India had to work hard to create new markets in Latin America, Africa and other such markets where China is not interested to enter. China is interested in only the top markets like USA and European countries.
China suppresses its people with Red Army
China enjoys low labour cost because of the repressive communist regime. There is no freedom for the Chinese people under this authoritarian and repressive regime. Anybody can be arrested at any time without any warrant and jailed without any trial. There are no newspapers other than the State owned newspapers which publish only news in appreciation of the Chinese government. There are no courts or law enforcing agencies. Opposition parties are not allowed to be formed and function. Democracy has already been murdered. There are no elections and the communist government continues in power forever with the help of the Red Army. In the name of Cultural Revolution in the sixties, more than hundred million Chinese people have been brutally murdered by Mao Tse Tung.
Trade unions are not permitted to function in China
Prisoners are made to work for nearly eighteen hours a day to produce various goods. These prisoners are not paid. In factories, workers are not permitted to form trade unions to demand higher wages. They are paid low wages and extracted lot of work. Therefore it is no wonder that the Chinese goods flood the nook and corner of all shops in USA and Europe. China has built up huge foreign exchange reserves of more than $300 billion because of this dumping of its goods into other countries. Chinese tires are dumped into India, thereby making Indian tire companies uncompetitive. Chinese plastic goods are dumped into India. By the time the government examines the issue and comes out with anti-dumping duty on Chinese products, the damage is already done.
Obama bursts out
Obama alleged that the Chinese Yuan is undervalued at around 25%. He demanded that China moved towards a market-based system for their currency Yuan. Obama was speaking at the Asia-Pacific Economic Cooperation Organisation meeting at Hawaii Islands. Obama rightly accused China of trying to game the system. Obama also stated that apart from the currency issue, protection of US companies in China and the issue of intellectual property rights also are proving difficult and problematic. Obama stated that he did not want China taking advantage of US business.
Tamil Nadu Assembly resolutions expose the foolishness of the Chief Minister
But Obama’s talk is not serious. He just made this point in an important economic meeting. It is like a college economics professor speaking before his students certain critical points. The speech will be forgotten by the professor immediately at the end of the class and the students will also forget it. For argument sake, even if Obama is serious in taking some steps to force China to mend its ways, it is doubtful whether the Republicans will support him. For example, Obama passed a “Currency Exchange Rate Oversight Reform Act of 2011” aimed to punish China for artificially keeping the value of its currency Yuan low. I don’t see a point as to what these kinds of resolutions can accomplish. These resolutions can be compared to the resolutions passed by the Tamil Nadu Assembly in India against the Sri Lankan President Rajapakshe. Apart from exposing the foolishness of the Tamil Nadu Chief Minister and invoking scorn from everybody, these resolutions go to the dust bin without serving any purpose. John Boucher, the Speaker of the House criticised the bill the next day it was passed by the Senate. Boucher stated that the Bill posed a severe risk of starting a trade war between two biggest economies.
Republicans will not tolerate any criticism of China
Many of the Republican Party heads are supporters of China. They will not mind US sinking, but will rise and fight if they see any harm to China. The Republicans will not mind if fourteen million US citizens are unemployed and a handful of top businessmen and executives are rolling in wealth. But the very same Republicans will not tolerate if they sense any harm to China.
America and China need each other
Today, the simple truth is that Americans are addicted to Chinese products as they were addicted to Japanese cars two decades back. If America is to produce these goods, they will cost a fortune. American consumers will cry foul and demand bringing back the Chinese products in the shelves of the shops and supermarkets. China also badly needs these exports to grow economically to become a superpower, if it has not already become one. Only through economic and military might can it threaten its Asian neighbours like Vietnam and India. It is a question of ‘you scratch my back and I scratch your back’. China and USA know this truth. Obama has voiced this opinion and passed a resolution in the Senate only to hoodwink the public opinion. The resolutions passed in the Tamil Nadu Assembly against the Sri Lanka President are only for hoodwinking the public and not for serving any real purpose. You put US Senate in place of Tamil Nadu Assembly and China in place of Sri Lanka. You will begin to understand the whole game being played by Obama.
Status quo will be maintained
Therefore Obama’s speech is just a tiny air bubble emerging from the pond when a stone is thrown into it. The bubble will burst in a few seconds and everything will become quiet again. The same fate will happen to this matter also. China will continue to devalue and keep its currency at artificial rates. China will dump its goods into other countries, unmindful of any criticism that emanates from any quarter. After all, if you are making millions and billions and somebody passes caustic remarks at you, you grin and continue to do what you are doing. Is it not?
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