Does an Undervalued Renminbi Hurt U.S. Manufacturers?
The China Currency Manipulation Act of 2008 accuses China of engaging in “protracted large-scale intervention in currency markets, thereby subsidizing Chinese-made products and erecting a formidable nontariff barrier to trade for United States exports to the People’s Republic of China.”[6] This is a novel use of the term “subsidy,” which normally refers to government payments to producers of an item. In this case, the government of China is purchasing U.S. dollars or U.S. government securities, so the Chinese government payment is ultimately going to the U.S. government. To the extent that the renminbi is undervalued as a result, the benefit goes to U.S. consumers and businesses, which pay lower prices for Chinese goods imported into the United States. Chinese manufacturers get less for what they sell as a result of the process. If there is a subsidy here, the beneficiaries are U.S. consumers and taxpayers. More well founded is the idea that renminbi undervaluation forms a non-tariff b
