Revaluing the yuan (#126; Topic B)

Since the World Affairs Forum on "China Today" (#123) took place just three days after PRC President Hu's visit to USA (#124), and since the revaluation of yuan, China's currency, was suggested by the media as a "hot" topic for discussion, I decided to add a few comments on it in my presentation. A key point by researchers at the Center for Strategic and International Studies (beside that quoted in #125) is that "The chief cause of America's difficulties is not China [but by] attending to its fiscal and trade deficits and strengthening its educational system." This sentiment was echoed by a Stanford professor writing in the Wall Street Journal (4/20/06): "China's reduced trade surplus -- i.e., less lending to the U.S. -- will mean higher interest rates here and abroad." About this time, the G-8 finance ministers met, and there were rumblings about the strength of the US dollar as the world's reserve currency. This allowed me to quote another essay, in the Barron's 4/24/06, detailing the fate of pound sterling (the world's reserve currency before the US$) from 1 UKP = $4.03 in 1948, to = $2.80 in 1949 devaluation, to = $1.05 in 1985 all-time low, and to = $1.78 now; the implication is that, if not careful, the US$ might follow suit. Indeed, when Treasury secretary Snow, in a CNBC interview on 4/29/06, could not give a convincing reason why a revaluation of the yuan does not mean a devaluation of the US$, the market reacted by lowering the dollar's value relative to the Euro and to the yen. Well, the market rightly says that it cannot be easily dumbed down.