(PRWEB) July 22, 2005
New Jersey consulting firm Business Restoration Partners, LLC, is nearing completion of a comprehensive forecast of the Chinese economy through 2015, and theyÂve been thinking about the yuan quite a bit over the last few weeks. International economist James A. McCune, Principal Consultant for Business Restoration Partners, suggests several good reasons why the rising yuan wonÂt help U.S. manufacturers as much as government officials hope it will.
ÂThe most important reason,Â claims McCune, Âis that 70% plus of the goods America imports from China are Âre-exportsÂ; goods that have been mostly made somewhere else and then exported to China for final assembly, before China, in turn, exports them to the U.S. Just as surely as the revaluation of the yuan will make goods China exports to the U.S. more expensive, it will also make goods China imports cheaper. Hence Chinese businesses will, for the most part, have the flexibility to lower prices and maintain market share, if they choose to.Â
"Another reason the rising value of the yuan won't have that much impact on U.S. trade is one many people in the U.S. don't think about," adds McCune, "and that is the fact that 'inland' labor in China is even cheaper than 'coastal' labor. So manufacturers with assembly operations can actually relocate inland to reduce labor costs and offset an additional increment of the price pressure caused by the rising yuan." (The companyÂs website, http://www.business-restoration-partners.com , lists several additional reasons why the revaluation of the yuan wonÂt help the U.S. much.)
Returning to the subject of the plight of U.S. manufacturing, Mr. McCune quips: ÂCongress shouldnÂt act so alarmed, or so outraged by the loss of manufacturing jobs in this country . . .and they shouldnÂt be treating China as though they all the sudden caused it. It is the natural, inevitable, and predictable result of CongressÂ 25 year pursuit of what feels likeÂeven if itÂs not quiteÂa radical free-trade-at-any-cost policy.Â
The bottom line, according to economist McCune: ÂWhen higher U.S. interest rates are added to higher U.S. import prices and not much help on exports, for the reasons stated on our website, this whole revaluation thing seems a bit too much like Âsmoke and mirrors,Â and not enough like a real positive for the U.S. economyÂ
To find out more about BRPÂs upcoming release of their comprehensive 10-year outlook for the Chinese economy: "ChinaÂs Economy: The Outlook Through 2015," visit their website at http://www.business-restoration-partners.com
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