The Chinese Yuan climbed/fell, depending on your perspective, to less than 7.9 yuan to the dollar since Treasury Secretary Paulson returned home a couple of weeks ago.
This rate of change is more than 4 times the annual rate of appreciation for all of last year.
Paying more for Chinese goods is supposed to help ease the trade imbalance. The way I understand it is that if Chinese goods cost more, the US will buy less. American products will cost less and the Chinese will buy more.
But…it doesn’t happen that way. The Chinese still buy what they need from the US at the going US price AND the US side ends up paying more for the Chinese goods and the trade imbalance goes nowhere.
I remember the same discussion years ago about the value of the Japanese yen. The Japanese yen has climbed to twice the rate it was from the 220-250/$1 to the current 115-120/$1. And the imbalance is still in favor of the Japanese.
To right the trade imbalance, the US needs to make products that are affordable to the Chinese so that they will buy more of whatever product than we buy from them.
What do you think?