China’s Currency Manipulation and the Effect on the United States Derek Griest, Fraser Hunt, & Alka Shah

Stuck on U SA Essentially 1994 (1997 officially) until July 2005, it was pegged strictly to the dollar at about 8.28 Yuan to the dollar Now adjusted nightly by Zhou Xiaochuan according to basket of currencies Appreciated slightly since July 2005 Still believed to be vastly undervalued Accused of being currency manipulator

Value of the Yuan Against the Dollar Over Past 2 Years

Strength of U.S. Dollar Against Various Currencies: Percentage Change Year South KoreaCanadaJapanChinaIndiaEuro United Kingdom %4%12%0%7%2%5% 20024%1%15%0%4%-5%-3% %-11%-10%0% -15%-9% 20041%-7%-10%0%-5%-10% %-7%-5%-1%-5%0% Total Change: %-19%0%-1%0%-27%-17%

Strength of U.S. Dollar Against Various Currencies: Percentage Change Year South KoreaCanadaJapanChinaIndiaEuro United Kingdom %4%12%0%7%2%5% 20024%1%15%0%4%-5%-3% %-11%-10%0% -15%-9% 20041%-7%-10%0%-5%-10% %-7%-5%-1%-5%0% Total Change: %-19%0%-1%0%-27%-17%

Strength of U.S. Dollar Against Various Currencies: Percentage Change Year South KoreaCanadaJapanChinaIndiaEuro United Kingdom %4%12%0%7%2%5% 20024%1%15%0%4%-5%-3% %-11%-10%0% -15%-9% 20041%-7%-10%0%-5%-10% %-7%-5%-1%-5%0% Total Change: %-19%0%-1%0%-27%-17%

Strength of U.S. Dollar Against Various Currencies: Percentage Change Year South KoreaCanadaJapanChinaIndiaEuro United Kingdom %4%12%0%7%2%5% 20024%1%15%0%4%-5%-3% %-11%-10%0% -15%-9% 20041%-7%-10%0%-5%-10% %-7%-5%-1%-5%0% Total Change: %-19%0%-1%0%-27%-17%

Deficit Overall U.S. Deficit $726 billion of 2005 Deficit of $201.6 billion with China for 2005 –Almost 25% Due to the low currency rate of Yuan, we can import from them cheaply and exports are expensive for us.

Exports (Millions of Dollars) ChinaUSA China Growth USA Growth China's Minus the USA , ,6270% , ,74323%14%9% , ,07325%22%3% , ,18251%34%17% , ,13852%33%19% , ,79761%36%25% , ,918106%53% , ,100120%42%78% , ,103169%35%134% , ,771262%41%221% , ,775390%60%331%

Reinvest China reinvests in the US economy Feel that we are not going to default, though growing worried Bonds and foreign reserves Keeps our inflation low Deficit Reinvestments Bonds, Equities etc.

M.A.F.D. Mutually Assured Destruction, now known as MAD 2 or MAFD (Mutually Assured Financial Destruction) If China stops investing then the likely results are bad for them; world US refusing to hone deficit and trying to hold it over China’s head

Jobless Due to cheap imports, there has been a loss of manufacturing which put people out of jobs, especially the textile industry.

Protectionism U.S. wants to add duties 27.5% on Chinese imports until China allows its currency to float more freely against the dollar To decrease bilateral trade deficit with China Believed that effect could be minimal due to other countries China feels prices are lower in U.S., therefore refuses to change currency policy