US trade deficits and Sino-US relations
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American politicians and policy makers have blamed China's exchange rate for the large US trade deficits. This paper explains why the USA treats its trade deficits with China as a security issue that have become a source of friction in Sino-US relations. The essay argues that this friction is a useful deflection from the politically difficult policy action needed to remedy the US economy and cannot easily be removed by the Chinese side alone. The structure of global trade and the reality of China's political economy, which forces Chinese leaders to develop policies for a "harmonious society" in the face of growing inequality also makes it difficult for China to respond positively to US pressure on the exchange rate.
Journal of Contemporary Asia
© 2010 Routledge. This is an electronic version of an article published in the Journal of Contemporary Asia, Volume 40, Issue 4 November 2010 , pages 656 - 673. The Journal of Contemporary Asia is available online at: http://www.informaworld.com with the open URL of your article.
Government and Politics of Asia and the Pacific