A Discussion to Reform Chinas Monetary Policy

The world’s seven largest industrialized countries, known as the Group of seven, finance ministers met to discuss Chinas current exchange rate. This group of countries is composed of Canada, France, Germany, Italy, Japan, and the United States. The main concern of these seven countries exists in Chinas exchange rate to the industrialized countries. The Group of seven wants to post record that because China has been directly linking the Yuan to the U.S. dollar it has undervalued the Yuan by as much as forty percent. This practice has given Chinese manufacturers a cutthroat advantage against U.S. producers. Since the Chinese have been keeping exchange at this rate, the United States has experienced a billion dollar trade deficit with china. Last year the United States also reported a loss of three million manufacturing jobs since 2000. These domestic economic losses will continue to prevail if China dose not move its monetary policy to a floating currency. One solution the group of seven has proposed is to use tariff policies directed to shrink the deficit gap among countries that trade with china. The policy projected would be a stiff consequence devised for Chinese reforms. International trade will continue to bear the burden of Chinas exchange rate policy until a reactive course of action is agreed upon and implemented. See http://www.businessweek.com/ap/financialnews/D89FTGE80.htm?campaign_id=apn_home_down for reference.