On Chinese Production
16 January 2007
The Editor, New York Post
Dear Editor:
As you report, Uncle Sam "blames Beijing's currency practices for contributing to the United States' bloated trade deficit with China" ("IMF Chief: Global Economy Threats Easing," Jan. 16). But as my colleague Tyler Cowen explained in his New York Times column, a higher valued Chinese yuan would have little, if any, effect on the size of this trade deficit.
The reason is that Chinese manufacturers specialize in assembly: they buy component parts from other Asian countries and then assemble these parts into finished products for export.
By lowering Chinese producers' costs of acquiring key inputs, a higher-valued yuan would reduce their costs of production - and thus do little to raise the prices that American consumers pay for goods made in China.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
The Editor, New York Post
Dear Editor:
As you report, Uncle Sam "blames Beijing's currency practices for contributing to the United States' bloated trade deficit with China" ("IMF Chief: Global Economy Threats Easing," Jan. 16). But as my colleague Tyler Cowen explained in his New York Times column, a higher valued Chinese yuan would have little, if any, effect on the size of this trade deficit.
The reason is that Chinese manufacturers specialize in assembly: they buy component parts from other Asian countries and then assemble these parts into finished products for export.
By lowering Chinese producers' costs of acquiring key inputs, a higher-valued yuan would reduce their costs of production - and thus do little to raise the prices that American consumers pay for goods made in China.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Monday October 1, 2007 at 5:45am