As U.S. government officials continue to pressure China to allow the value of its currency to rise, the stakes of the debate may have become overblown.
China's artificially-devalued renminbi isn't having as pernicious an effect on American jobs as Washington soundbites make it seem, writes Harvard professor Mark Wu in a New York Times column published Tuesday. While China's currency controls do indeed pose a threat to global economic recovery, it's not all about the United States, Wu writes.
We should discuss currency issues with China, but the exchange rate should not be at the top of the bilateral agenda. The issue is best left to the Group of 20, for this is as much the rest of the world's problem as it is ours.
The Obama administration has long been putting pressure on the Chinese government to stop artificially devaluing its currency, arguing that the present policy fosters a harmful trade deficit. If the renminbi were to appreciate, the argument goes, the Chinese would consume more and produce less, thereby spurring global recovery. With Chinese President Hu Jintao visiting Washington this week, U.S. Treasury Secretary Tim Geithner has taken a hard line.
The nation's economic relationship with China "has huge economic benefits to Americans," Geithner said, according to Dow Jones Newswires, and he argued that the exchange rate needs to change.
"The only choice for China is how it happens, and what mix happens through inflation and through the exchange rate itself," he said, according to Reuters. "There is no alternative path."
China has become a popular scapegoat among disgruntled American workers, who complain that the low cost of labor in China has directly hurt their own jobs. But this talk is mostly unfounded, HuffPost's Peter Goodman reported last week. It distracts Americans from the real causes of economic stress, most of which are homegrown.
Wu makes a similar argument. The quickest way for the U.S. government to fix the economy, he writes, is to start at home:
Resolving our economic troubles will depend much more on reinvesting in education, transportation and other government services, basic science and applied research than on forcing China to yield on its currency.
Geithner has acknowledged that ultimately the U.S. is responsible for its own economy.
"We need to understand that our strength as a nation will depend not on choices made by China's leaders, but on choices we make here at home," he said last week, according to the Washington Post.