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Home Publications Blogs Beat the Press China's Central Bank Announces Job Creation Program for the United States

China's Central Bank Announces Job Creation Program for the United States

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Monday, 25 November 2013 08:07

That may be a bit of an overstatement, but the comments from Yi Gang, a deputy governor at China's central bank, deserved much more attention than they received. According to Bloomberg, YI announced that the bank would no longer accumulate reserves since it does not believe it to be in China's interest. The implication is that China's currency will rise in value against the dollar and other major currencies.

This could have very important implications for the United States since it would likely mean a lower trade deficit. Since other developing countries have allowed their currencies to follow China's, a higher valued yuan is likely to lead to a fall in the dollar against many developing country currencies. A reduction in the trade deficit would mean more growth and jobs. If the deficit would fall by 1 percentage point of GDP (@$165 billion) this would translate into roughly 1.4 million jobs directly and another 700,000 through respending effects for a total gain of 2.1 million jobs.

Since there is no politically plausible proposal that could have anywhere near as much impact on employment, this announcement from China's central bank is likely the best job creation program that the United States is going to see. It deserves more attention than it has received.

Comments (6)Add Comment
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written by Last Mover, November 25, 2013 8:30

How much did WalMart pay Yi Gang not to say this so it won't have to compete for labor when fully employed?
That Direct?
written by James, November 25, 2013 2:15
You don't think other countries would replace China in taking our jobs? I realized the trade deficit between China and U.S. is huge and unsustainable but if the gaps between the two countries drop, other countries could simply step in and replace China.
...
written by watermelonpunch, November 25, 2013 6:16
written by James, November 25, 2013 2:15
You don't think other countries would replace China in taking our jobs?


Which countries would?

India? They might have to solve their toilet infrastructure problem first.

From what I've read, U.S. is slated to be in the top 3 to horn in on China's share, as amazing as that may seem to exceptional Americans.
China's Manufacturing Wages
written by John Parks, November 25, 2013 9:37
"IF" the increase in manufacturing wages in China is between 10-20% per annum you can expect jobs in the US to benefit also.
http://www.eeo.com.cn/ens/2013/0913/249730.shtml

The attention that China is paying to robotics is a response to this increased cost of manpower.
A New Reserve Currency?
written by Robert King, November 26, 2013 9:38
The immediate benefits of a a weakening dollar are trade related ie jobs, cheaper US goods etc, as pointed out by prior comments. The long term prognosis is less promising. Paul Craig Roberts (http://www.paulcraigroberts.org/) warns of the dollar weakening its Reserve status. Commodities such as oil may some day be widely quoted in yuan if the US doesn't get its debts and deficits in order.
...
written by watermelonpunch, November 26, 2013 2:01
@ John Parks
Interesting because I've been reading how robotics is cause of some re-shoring of jobs from China...

@ Robert King
Swedes seems to be doing okay despite that oil is not quoted in krona, so not sure the relevance.

Frankly, I fail to see how sacrifice of so much is worth holding onto being the reserve currency.
If ordinary Americans have ever benefited from this, it doesn't seem like we are anymore.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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