The Other Chinese Currency Issue

Jan. 13, 2005
By John S. McClenahen American manufacturers, especially those heavily invested in plants and equipment in the U.S., continue to complain about what they contend is an undervalued Chinese currency. The less-than-market-value yuan puts them at a ...
ByJohn S. McClenahen American manufacturers, especially those heavily invested in plants and equipment in the U.S., continue to complain about what they contend is an undervalued Chinese currency. The less-than-market-value yuan puts them at a competitive disadvantage, they say. But its relationship to the U.S. dollar is not the yuan's only misalignment, asserts Lester Thurow, Lemelson Professor of Management and Economics at the Massachusetts Institute of Technology, Cambridge, Mass. "The Chinese currency is probably 50% undervalued relative to other underdeveloped countries," says Thurow. As a result, "we're basically sucking growth out of places like Mexico and Malaysia and putting it into China." For example, says Thurow, television manufacturing is leaving the maquiladoras in Mexico and moving to China.

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