Chinese President Hu Jintao is in Washington this week meeting with President Obama and members of Congress. While the meetings are reportedly cordial, there isn’t much agreement economically.
Overnight, China reported economic growth of 9.8% with sharp increases in both industrial production and retail sales. This growth was above estimates and feared to be inflationary. It is likely that China became the world’s second largest economy last year (surpassing Japan) with a $6 trillion Gross Domestic Product.
China’s enviable growth is the focus of longstanding US criticism of the country’s unfair trade practices. Inexpensive labor, government controlled currency, and tariffs have helped to produce China’s remarkable growth. Keeping the Chinese yuan at an artificially low level makes Chinese goods and services less expensive relative to other countries’ goods and services. US government and business leaders argue for a more competitively priced currency that would be subject to free market influences. These criticisms are valid, in our opinion but are not the whole growth story.