The Progress Report, part 3 of 3
This "part three" is only a part of part three because it NEEDS attention. There are several links in the paragraph that presents the problem, and if you don't see it as a serious issue that needs addressing (though I personally am not clear on what, if anything, can be done about it) you have no clue about how the US Economy works.
I've decided to go to the source. You can pick up the rest of the links on the topic here.
China has lost faith in stability of U.S. dollar, top Chinese economist says
Edith Lederer
Canadian Press
January 26, 2005
DAVOS, Switzerland (AP) - China has lost faith in the stability of the U.S. dollar and its first priority is to broaden the exchange rate for its currency from the dollar to a more flexible basket of currencies, a top Chinese economist said Wednesday at the World Economic Forum.
At a standing-room only session focusing on the world's fastest-growing economy, Fan Gang, director of the National Economic Research Institute at the China Reform Foundation, said the issue for China isn't whether to devalue the yuan but "to limit it from the U.S. dollar."
But he stressed that the Chinese government is under no pressure to revalue its currency.
China's exchange rate policies restrict the value of the yuan to a narrow band around 8.28 yuan, pegged to $1. Critics argue that the yuan is undervalued, making China's exports cheaper overseas and giving its manufacturers an unfair advantage. Beijing has been under pressure from its trading partners, especially the United States, to relax controls on its currency.
"The U.S. dollar is no longer - in our opinion is no longer - (seen) as a stable currency, and is devaluating all the time, and that's putting troubles all the time," Fan said, speaking in English.
"So the real issue is how to change the regime from a U.S. dollar pegging ... to a more manageable ... reference ... say Euros, yen, dollars - those kind of more diversified systems," he said.
"If you do this, in the beginning you have some kind of initial shock," Fan said. "You have to deal with some devaluation pressures."
