Since 1994 the People's Republic of China has tightly pegged its currency to the US dollar. According to many economists, that has resulted in a severe undervaluation of the Chinese currency.
"This undervaluation continues to have a negative impact on the American economy, specifically the manufacturing sector, because Chinese exports are underpriced and American imports to China are overpriced. Hardworking Americans, such as the dedicated Mainers who work in our state's mills and factories, should not have to suffer the job losses created by this unfair competitive advantage," said Senator Collins. "As a major player in the global economy, the Chinese government must honor its international trade obligation and show that it intends to operate as an equal partner in the international trade market."
The current Chinese currency policy acts as a subsidization of China's exports and a virtual tariff on foreign imports. By not allowing the value of the yuan to float in world currency markets, Chinese manufacturers are able to flood the United States and other countries with products at prices that domestic companies cannot match. The undervaluation of China's currency is also hurting the economies of Europe, Mexico, and Latin America. Furthermore, this manipulation is in violation of the rules of the World Trade Organization and International Monetary Fund agreements, of which China is now a party.
"It is crucial to the world economy that the Chinese government keep its promise to adopt a market-based system of currency valuation," said Senator Collins. "Flexible exchange rates benefit all international trading partners and are a key component to the health of global trade and the stability of the world economy."