China manipulating currency

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    I recently had a conversation with my father who has been in the steel business for about 40a years now. He began telling me that China manipulates their currency. I have heard this before from Mitt Romney during the Republican debates but I have never fully understood it. Is there a book suggestion you could give me on this subject?


    For an overview of the claims about China manipulating its currency, take a look at China’s Currency: An Analysis of the Economic Issues by Wayne Morrison and Mark Labonte. It’s available at google books. I don’t endorse their analysis, but they give a decent account of the claims and some historical background.

    The basic claim is that the Chinese government has undervalued the renminbi (RMB) for the purpose of making Chinese exports cheaper for foreigners. The Chinese government accomplishes this, allegedly, by supplying RMB against dollars which suppresses the price of RMB in dollars. In other words, a dollar buys more RMB than before. The Chinese government then uses the dollars it acquires when it sells RMB to buy U.S. Treasuries which artificially increases the merchandise trade surplus China has with the U.S. (or, equivalently increases the U.S. merchandise trade deficit with China). American manufacturers complain that this puts their production at a competitive disadvantage compared to Chinese production.

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