This thought from MJ Perry gives more clarity to the issue...........
"Let me break from [the] consensus about China's currency policy and present an alternative position: In the best of all possible worlds for the United States, China would use its labor and capital to manufacture consumer products like clothing, footwear, furniture, electronics, and appliances and send $300 billion worth of these products to U.S. consumers for free every year as a gift or a form of foreign aid to the American people. In addition, the Chinese would produce and send to America another $100 billion worth of raw materials, parts, industrial supplies, inputs, and natural resources at no charge, as a gift to American manufacturers every year. (Note: That's roughly the amount of goods we will purchase from China this year.) . . .
Unfortunately, that extreme Chinese generosity is not realistic, so here's a possible second-best outcome: . . . [China] agrees to send us $500 billion worth of consumer and industrial goods every year, but agrees to sell us those manufactured goods at a substantial 20 percent discount for only $400 billion. In that case, the amount of foreign aid will be less than the $400 billion in the first example, but will still be significant—a $100 billion gift every year from the Chinese people to the American people.
How will China generate this $100 billion in annual foreign aid to the United States? One way is to keep its currency undervalued to bring about the 20 percent discount on its products coming to America.
Which then raises the question: If China is willing to undervalue its currency, and in the process provide approximately $100 billion of foreign aid annually to American consumers and businesses, what's the problem? Why should we complain?"
Read his blog here..........
