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China Sends Message To Harry Reid; Weakens Yuan In Protest

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China Sends Message To Harry Reid; Weakens Yuan In Protest

10/13/2011 @ 10:05AM

Senate Leader Harry Reid (D-Nev) helped pass a bill this week that would impose tariffs on Chinese made goods if Washington proved the country was keeping its currency artificially weak as a trade advantage. Unhappy with the bill, China's Central Bank weakened the yuan for the second day in a row on Thursday.

Less than 24 hours after the U.S. Senate, led by Democrat Harry Reid, voted in favor of pressuring China to strengthen its currency, the Chinese government did the exact opposite. In retaliation for the anti-yuan bill, Beijing weakened the yuan against the dollar again on Thursday.

The yuan is now worth 6.37 to the dollar, down from 6.35 to the dollar following Washington’s vote late Tuesday.

Traders attributed the higher fixing to the tensions between Beijing and Washington over this week’s bill. The legislation is expected to die in the House of Representatives.

China has been increasing its currency’s value for years at the tune of around 5.5% annually. It was as strong as 6.1 to the dollar earlier this year. The yuan, also known as the renmimbi, is not a free-floating currency so the market does not determine its value. The Central Bank of China does. So for Washington to ask the Central Bank of China to strengthen its currency is like China asking the U.S. to raise interest rates so China’s government can get a real return on its investment in U.S. debt.

Moreover, despite China costing more as the yuan strengthens, the U.S. trade deficit with China continues to increase to record levels. In fact, the trade gap with China continues to rise.

China released data Thursday showing a smaller-than-expected trade surplus in September, which will likely take some pressure off Beijing to let the yuan rise faster, the Wall Street Journal reported from Shanghai Thursday. Some lawmakers and businesses in the U.S. complain that China’s strict currency controls keep it from rising in value, in effect subsidizing China’s major exporters and causing the trade deficit. The U.S. trade surplus narrowed to $14.51 billion from $17.76 billion in August, falling short of the median $17.25 billion forecast by 12 economists in a Dow Jones Newswires survey. A Chinese trade official said Thursday that the yuan’s appreciation has already eroded the competitiveness of Chinese exports and limited their room for growth, the Journal reported. Vice Customs Minister Lu Peijun said during a local press conference there that China’s full-year trade surplus is likely to fall by around 7% from 2010.




This is all by political design to create trade wars internationally and throw iran in there too!

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