Reports

China revaluation would hurt US jobs: Report

(Agencies)
Updated: 2010-04-16 09:29

Extensive outsourcing by US industry means that a revaluation of the Chinese yuan sought by many US politicians would destroy US jobs,a study by independent economists and other experts said on Thursday.

The study, published by the Centre for Economic Policy Research (CEPR), was published on the day that the US Treasury had been due to issue a report widely expected to brand China a as a currency manipulator.

But Treasury Secretary Timothy Geithner decided on April 3 to delay the report, defusing rising tension over China's currency between Beijing and Washington.

The CEPR study, comprising 28 analyses of the issue, concludes that a yuan revaluation of only five percent would eliminate China's trade surplus with the world.

But it would only cut the US trade deficit with China by 61 billion US dollars, according to the study, edited by trade economist Simon Evenett.

A 10 percent revaluation of the yuan would improve the US deficit by 111.5 billion US dollars -- not enough to eliminate the US shortfall with China.

Because so many US exporters buy parts and components from China, the revaluation would raise their costs, resulting in a hit to US exports that would cost 424,000 US jobs, it said.

If the US imposed a 10 percent tariff across the board on Chinese imports and China responded in kind with a similar 10 percent duty on US exports, 947,000 US jobs would be lost.

"Recent US proposals remind me of the adage: 'Be careful what you wish for'," Evenett said.

The study, published on the economic policy website vox.eu, found that the yuan was undervalued by between 2.5 percent and 27.5 percent.

But economists, including some from China, found that China would benefit from a revaluation, and that appreciation could stimulate Chinese exports and push China into higher-value manufacturing.