Currency fight with China divides US business
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Zhuji, China, Nov. 17: For American business, the United States currency dispute with China is a two-sided coin.
On the tails-we-lose side are companies like New York-based PS Brands, one of the biggest American importers of socks.
With the Obama administration pressing China to raise the value of its currency, the cost of Chinese-made socks is likely to rise.
So PS Brands’ main supplier here is demanding shorter contracts at higher prices.
“Before, I could price six months out,” Ms Elie Levy, chief executive of PS Brands, said during a recent factory visit here. “Now they only want to price 30 or 40 days out because the dollar could lose value.”
For the heads-we-win side, look to an American company 9,000 miles away, in Irvine, California, where the prospect of a weaker dollar is actually good news.
There, Staco Systems, a maker of aerospace electronics, has a growth business selling parts to state-owned aviation companies in China. If anything, a stronger Chinese renminbi would make Staco’s products even more attractive to buyers in China.
PS Brands’ problems, contrasted with Staco’s opportunities, make clear why American businesses are far from unified on whether Washington should be waging a currency fight with China.
United States monetary policy has already caused the dollar to drop in value this year against most other major currencies. But the dollar’s value has fallen only modestly against the renminbi. That is because Beijing has kept the renminbi artificially low by pegging it to the dollar — instead of letting it float to its market level, as most other global currencies do.
Beijing’s critics say the artificially low renminbi, by making Chinese exports cheaper than they otherwise might be, has helped China run up its huge trade surplus with the United States and much of the rest of the world.
At the G20 summit meeting in Seoul last week, President Obama chided China on its currency policy, calling for Beijing to “act in a responsible fashion” and saying the undervalued renminbi was “an irritant to a lot of China’s trading partners and those who are competing with China to sell goods around the world.”
Beijing countered that between 2005 and 2008, when the value of the renminbi rose by about 20 percent against the dollar, it had little braking effect on the soaring United States trade deficit with China. Chinese officials say Washington is simply searching for a scapegoat.
“China will do its best to manage its economy, and never blame others for its own problems,” China’s president, Mr Hu Jintao, said.
American multinational manufacturing companies can feel the pinch of dollar-renminbi fluctuations. In many cases, though, they have set up operations in China and elsewhere that let them hedge by doing business in local currencies.
But the currency exchange rates are a much bigger factor for the small and midsize American firms that still manufacture on shore, like Staco.
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