We Should Thank China for Its Currency Policy

When you hear discussion of China’s currency manipulation, keep the following in mind:

1. China's currency manipulation is a form of foreign aid, and to the direct advantage of millions of U.S. consumers, especially low-income groups, and to the direct advantage of thousands of American companies buying inputs from China.

2. Forcing China to revalue its currency would benefit some American manufacturers competing with China, but would significantly harm those American consumers and businesses currently buying undervalued imports. On net, there would be more harm to American consumers than benefits to American manufacturers, which would reduce our overall standard of living.

3. Like other forms of mercantilism and protectionism, forcing or pressuring China to appreciate its currency would favor certain domestic producers over millions of consumers and import-buying companies, but would make the United States worse off, not better off.

4. Finally, instead of complaining, we should be thankful for China's foreign aid to Americans through an undervalued yuan, overvalued dollar, and undervalued goods that collectively save American consumers and companies billions of dollars every year.

Bottom Line: If you wouldn't object to China sending products to the United States for free, then on what basis would you object to currency “manipulation” that allows you to purchase undervalued Chinese imports at a huge discount and great bargain?

Excerpt from my article "Why We Should Thank the Currency Manipulators" at The American.

Update: Thanks to Don Boudreaux for the link, who also links to Bastiat's famous "Candlemakers' Petition," which gave me an idea for another way to make the argument about China's "currency manipulation":

1. If you wouldn't object to getting free light from the sun (even though that reduces output and employment for some domestic producers of candles, lights, lamps, lightbulbs, flashlights, electric utilities, etc.), then you likewise shouldn't object to getting free, or greatly "undervalued" goods from China as a result of its currency manipulation in favor of Americans purchasing Chinese imports.

2. If you think that China should be forced or pressured to revalue its currency to the advantage of U.S. companies competing with China, then you must also agree with Bastiat's facetious appeal to the French parliament advocating trade policy to protect the French candlemakers against the "ruinous competition of a foreign rival," which is none other than the sun:

"We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds—in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat."