Great Expectations and the Making of S&ED.doc

1、1Great Expectations and the Making of S the U.S. should relax restrictions over technology exports to China and acknowledge itsmarket economy status so as to create a healthy environmentand expand trade on both sides of the Pacific. 7But the U.S. holds that China obtains a competitive advantage in t

2、rade via its lower currency value, which causes thetrade imbalance between China and U.S. Consequently, insome American political and academic circles there is a call forRMB appreciation. However, the RMBs value is not the reasonfor the weak competitiveness of the U.S. economy or its dwindling emplo

3、yment opportunities. Take the currency fluctuationbetween the U.S. dollar and Japanese yen for example; the yenwas under heavy pressure and appreciated sharply against theU.S. dollar in 1985, but a favorable balance of trade between,Japan and U.S. did not decrease to any real extent in the following

4、 decade. Although some conventional export productsshrunk due to the change in competitive conditions, the exportof high-tech products kept growing. Moreover, due to Japanslong-term economic downturn, it was impossible to increaseits importation from the U.S. The trade imbalance between theU.S. and

5、Japan hasnt fundamentally changedand this is concealed by the trade imbalancebetween the U.S. and China. The internationaleconomic imbalance is rooted in the imbalancesof U.S. macroeconomic policy, the savings andconsumption ratio, a loose monetary policy,rampant financial speculation and weak super

6、vision of markets. 8Whenever a great power is rising, its currency becomes more valuable. The RMB exchange rate against the US dollar has increasedover five percent since 2005. The figure was3.5 percent in 2010 alone. Therefore, the RMBshould be able to sustain a reasonable level ofappreciation in t

7、he future. The issue of the RMBexchange rate is a matter of Chinas monetarysovereignty. The appreciation is bringing aboutheavy pressure on Chinas export enterprises.Accordingly, the room to appreciate should be based on Chinas assessment and judgment onthe current situation. In a sense, Chinas ente

8、rprises face enormous pressure to make profitswhile trying to mitigate a severe unemploymentsituation, which has objectively restrained thegovernment from appreciating the RMB in thewake of the yens appreciation. A gradual andcontrolled appreciation in 2005 was key to upgrading the industrial struct

9、ure of Chinas exports. To balance bilateral trade, many choicesexist other than currency appreciation. Forexample, boosting product price by factor price(salaries and other costs) would not only expandChinas import demands, but also eliminate itsoutdated production capacity and reduce theexport scal

10、e of low efficiency products. Cooperation in the field of new energy 9Every country is anxious about energy security as oil prices keep rising and oil regions experience social turbulence, besides which, climatechange and environmental pollution are propelling the development of green energy the wor

11、ldover. Being major energy consumers, China andthe U.S. share extensive common interests. On Obamas visit to China in 2009, the twonations agreed to work together in research and development ofnew energy. Though Chinas fast-growing market in new energyprovides favorable opportunities for bilateral c

12、ooperation inthis field, there are many obstacles to cooperation. In 2010, theUnited States carried out a number of anti-dmnping measuresagainst Chinese new energy products. Clearly, more vigorous efforts need to be made to enhance mutual trust of the two sides. S&ED may also discuss the issue of management competition so as to avoid descent into a global zero-sum game. Both nations have their hopes riding on the dialogue.