Xie Guozhong: What Is The Possibility Of A Trade War Between China And The US?

The complaints from the US government and Congress about the yuan are getting worse.

The root cause is the sluggish labor market in the United States. Employment is undoubtedly the most important issue in the coming November mid-term elections.

When the Republicans accuse the Democratic Party on this issue, the Democratic Party is likely to push the blame on China for political reasons.

But I still do not believe that the US Congress will pass substantive protectionist measures this year, but the risk is increasing.

If the Congress passes anything substantial, global stock markets will plunge, which will force legislators to return.

In the first seven months of this year, US trade in goods increased by 24.6% compared with the same period last year, but it was 12.1% lower than that in 2008.

The total trade volume of the United States is expected to reach US $3 trillion in 2010.

In the first eight months of this year, China's merchandise trade increased by 40% over the same period last year, and it is expected to reach 2 trillion and 900 billion US dollars this year, an increase of 15% over 2008.

Because of the huge amount involved, it is hard to imagine such a trade war.

Even when the possibility of trade war increases, it will cause a global stock market crash.

Washington's goal is to balance bilateral trade.

Us customs data show that in the first seven months of this year, US imports to China amounted to US $193 billion, and export trade amounted to US $48 billion 600 million.

But between the United States and Japan

Yes, bilateral trade balance can be improved by adjusting the exchange rate.

Under certain exchange rate levels, Chinese factories will have to close down due to reduced production.

The only way for bilateral trade to find a balance in the near future is that Chinese manufacturers will cut their output due to weakening profits, and American consumers will buy less Chinese goods because of the high price.

But this solution has made the cake smaller.

In order to balance Sino US bilateral trade, we have no other choice but to undermine the economic ideas of China and the United States.

Because the exchange rate of RMB is not floating, some people say that it is not based on the market.

I am not saying that the Chinese government has put the exchange rate at a "correct" level.

But I think the exchange rate determined by the market can not reach the correct level.

During the bubble of 1990s, the market pushed up Asian currencies, which led to their collapse in the financial crisis of 1998.

In fact, there are not many changes in the fundamentals, which can not explain such a big fluctuation.

The yen exchange rate has changed dramatically, but its economy has not changed.

This gives China a very clear lesson: to make the exchange rate completely decided by the market will bring disaster.

Rational arguments will not determine the direction of development in the short term.

But political factors do.

The embarrassment of the Democratic Party's positive mid-term elections.

The house of representatives will use all means to gain support, which is to promote trade protectionist legislation against China.

But even if it passes, its financial market turmoil will persuade the Senate to block the bill.

There is little possibility of a trade war between China and the United States.

Most of China's exports come from US capital or other multinational companies.

The retail price of consumer goods made in China is three to four times the factory price.

The value of these commodities in the US sector is three times that in China.

It is hard to imagine that the United States is willing to lose money to force the renminbi to appreciate, which will not solve the problem of trade balance between the two countries.

There are many problems in China, but the undervalued exchange rate is not one of them, and the RMB may even be overestimated.

The pressure of appreciation comes from speculation about how the United States will treat China.

China's money supply has increased 20.5 times in the past ten years.

I do not remember such an economy. After such a long and large-scale monetary expansion policy, the currency has not depreciated.

Once the appreciation of the renminbi is expected to reverse, capital flows will be massive.

This is a real test for China, not the pressure of appreciation today.