China's Currency: An Analysis of the Economic Issues [September 29, 2011]   [open pdf - 483KB]

"China's policy of intervening in currency markets to limit or halt the appreciation of its currency, the renminbi (RMB), against the U.S. dollar and other currencies has become an issue of concern for many in Congress. Critics charge that China's currency policy is intended to make its exports significantly cheaper, and its imports more expensive, than would occur if the RMB were a freely-traded currency. They contend that the RMB is significantly undervalued against the dollar and that this has been a major contributor to the large annual U.S. trade deficits with China and the loss of U.S. jobs in recent years. Several bills have been introduced the 112th Congress that seek to address the effects of undervalued currencies, including H.R. 639, S. 328, S. 1130,S. 1267, and S. 1619. On the other hand, some analysts contend that China's industrial policies, its failure to adequately protect U.S. intellectual property rights, and its unbalanced economic growth model, pose more serious challenges to U.S. economic interests than China's currency policy. […] Many economists contend that China should take steps to rebalance its economy by lessening its dependence on exports and fixed investment as the main drivers of its economic growth while boosting the level of domestic consumer demand. A market-based currency policy is seen as an important factor in achieving this goal. Further RMB appreciation could help promote the development of nonexport industries in China, while boosting China's imports, including from the United States. This report provides an economic analysis of China's currency policy and examines current legislation and options for Congress."

Report Number:
CRS Report for Congress, RS21625
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