OFFLINE

this is KIND OF political, but also kind of whatever's clevery too.



When President Obama meets with Chinese President Hu Jintao this week, one of the top items on the agenda will be resolving a dispute over how China sets the value of its currency. If Obama gets his way, it could spur U.S. exports, but it could also mean higher prices for American consumers.

For over a decade, China has held down the value of its currency, the Yuan, in relation to the dollar. That helps keep the cost of the goods Americans buy from China low and the price of American goods sold in China high. The cheap Chinese currency has helped open a wide trade imbalance between the two countries. In 2010, China’s trade advantage with the U.S. was more than $252 billion.

“China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country,” Treasury Secretary Timothy Geithner said is a speech last week. “As the [International Monetary Fund] has said consistently, these policies have the effect of keeping the Chinese currency substantially undervalued.”

On the surface, it’s a positive for American consumers. Nearly every product-- from candy to electronics to bicycles – is cheaper in the United States if it’s imported from China.

But for decades the United States has been pressuring China to rebalance its economy and bring the Yuan to a level playing field with the dollar, because American exports can’t compete with the Chinese goods.

The Obama administration has a goal of doubling U.S. exports in the next five years. But that won’t happen if China, the world’s fastest-growing market, remains out of reach to American companies because of the under-valued Yuan.

The consensus among economists is that the Yuan is 20 to 25 percent undervalued, up from 40 percent a few years ago.

In the short term, a fairer Yuan probably means higher prices for American consumers. But the long-term payoff could mean more jobs at home and healthier competition for goods on the global market.