Manufacturing Jewelers & Suppliers of America said it welcomed China’s recent decision to no longer peg its currency against the U.S. dollar, saying in a statement that it “could lead to fairer trade conditions.” The association added that it was only a first step and that “further re-evaluation of the currency would be necessary to affect any meaningful economic impact.”
“The overvaluation of the Chinese yuan has been one of MJSA’s key legislative goals in its push toward fair trade conditions,” said James F. Marquart, MJSA President/CEO. “We have worked with the National Association of Manufacturers to raise the profile of this issue, and China’s response to pressure applied by the U.S. is very positive. Now we need to see whether China will use its new system to create meaningful movement in the yuan’s value.”
By pegging its currency to the U.S. dollar, China had given its exports a strong advantage over those of other Asian countries, MJSA and others have said. Those nations in turn held down the value of their own currencies. This distortion had contributed to what is today a severe trade imbalance between eastern and western countries, and particularly between the United States and China.
The trade deficit between the two countries reached nearly $162 billion last year; jewelry accounted for over $1.6 billion.
China now values the yuan against a “basket” of foreign currencies, allowing for greater flexibility. Analysts said the move would raise the value of the yuan by only about 2 percent, far too low to affect prices or impact the trade imbalance, MJSA said. However, the new system allows for more continued movement.
“While this is a good first step, we still have work to do,” Marquart said.