A jump in the value of Chinese currency, the yuan, would make products manufactured in China more expensive, but could also help US manufacturers remain competitive abroad.
China’s weekend announcement that it will permit more flexibility in the exchange rate of its currency sounds like news that might interest Wall Street more than Main Street. But the fact is that such a move – it if really happens – could affect the pocketbook of virtually every consumer in the US.
Why? Because a big jump in the value of Chinese currency, the renminbi, could make products manufactured in China more expensive. And “products manufactured in China” means pretty much the entire inventory of every big-box store in America, as anybody who’s pulled out a credit card in the last decade or so knows.
Since even members of Congress shop at Wal-Mart, you might think Washington would be angry at the possibility of a stronger renminbi (China’s currency is also known as the “yuan”.) But that’s not true, as the US government has long pushed China to take such a revaluation step.
While a stronger renminbi makes Chinese products more expensive here, it also makes US products relatively cheaper there, and in general allows US exporters to better compete with Chinese competitors all around the world.