China, US to cooperate on yuan: Bush
(AP)
Updated: 2005-11-21 16:06

COSTS AND BENEFITS

U.S. President George W. Bush and China's President Hu Jintao make statements to reporters after their meeting in the Great Hall of the People in Beijing November 20, 2005. [Reuters]

China accounts for about a quarter of the U.S. deficit. But Chinese officials and independent economists say this largely reflects a profound change in manufacturing patterns in recent years to take advantage of cheap Chinese labor.

Such "processing trade," which accounts for more than half of Chinese exports, would simply move to other low-cost rivals in Asia if the yuan were revalued sharply, but jobs would not be regenerated in the United States, Chinese officials say.

They also say pressure for a stronger yuan also neglects the benefits that U.S. consumers derive from China's low costs.

Wal-Mart Stores Inc. alone, were it a country, would have been the sixth-largest importer of made-in-China goods in 2004. Its purchases of $18 billion were almost twice those of France, according to figures from brokerage CLSA Asia-Pacific Markets.

Economists say western pressure for a much stronger yuan is also self-defeating because about 60 percent of all Chinese exports are churned out by foreign-owned firms.