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CNN readers debate China-U.S. currency flap

By Kevin Voigt, CNN
  • Is the lower value of Chinese currency hurting U.S. consumers and businesses?
  • Some readers say a higher yuan will hurt U.S. businesses and consumers
  • Others argue the yuan's artificially low value is giving China an unfair advantage

(CNN) -- Is the lower value of Chinese currency hurting U.S. consumers and businesses?

As U.S. President Barack Obama and Chinese President Hu Jintao discussed this controversial issue on the sidelines of the nuclear summit in Washington on Tuesday, for weeks CNN readers have engaged in a spirited debate on the topic online.

Background: Unlike the U.S. dollar, whose value is determined by its trade in open markets, China has kept its currency pegged to about 7 yuan to the dollar. Many U.S. politicians and business leaders say that level is artificially low, keeping Chinese goods and labor cheap and giving an unfair advantage. Others argue that U.S. businesses and consumers are benefiting from low cost production and goods from China.

Many readers echo the sentiment of Stephen Roach, chairman of Morgan Stanley Asia, who told CNN's Eunice Yoon on Tuesday that China is becoming a scapegoat for U.S. woes.

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"I do not think that China should be held accountable for the problems that are bearing down on American workers (and) American companies and the broad U.S. economy," Roach told CNN. "These problems are problems of America's own doing and they reflect an unprecedented shortfall of American savings.

"Unless workers around the United States are willing to save more and put pressure on the government to save more, there's really no way around these trade deficits, and politicians who promise workers that things are going to get better if they just get tough on China are not being straight with American workers," he said.

Blogs by CNN's Yoon and Derrick McElheron have drawn more than 100 comments on the topic. Said poster Doug Renner: "The U.S. government perennially grants China the trading status of 'Most Favored Nation,' while U.S. businesses willingly import every product and many foods from China. Yet our politicians complain that 'Beijing's policies are costing the U.S. jobs?' Clearly such blame is misplaced."

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"Stephen Roach is a trained economist, but is now head of Morgan Stanley Asia ... how likely is he to say something that Beijing wouldn't like?" asked a reader identified as "rgg." "The bottom line is...the west is in a bind and the only reason China is not is that they didn't buy into the same financial models. Granted they have their own financial skeletons in the closet, but they have the money and we don't."

One reader points out that China faces social repercussions for floating the value of the yuan on the market. "If you increase the value of the yuan by the amount it is estimated to be undervalued (estimated as high as 40 percent by the Peterson Institute), there would be no great Chinese manufacturing base. They would be forced to compete on a level playing field and would lose badly.

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"The only somewhat acceptable argument for maintaining the yuan at artificially devalued levels is to avoid the massive civil unrest that would take place when all those workers are thrown out on the street because the products they manufacture would no longer be competitive." Added a reader identified as 'Strangewalk': "America needs to bring it's factories back home, and China has to allow a consumer driven middle class to develop."

How much more would you spend on Chinese goods?

Yoon's blog pointed out a comment by a Chinese manufacturer that an increase in yuan would be passed down to U.S. consumers, which begs the question: Are American consumers willing to pay more for goods manufactured in China?

"An increase in the value of the yuan will have an overall negative affect on American citizens," said 'OffshoreMM." "There are more than 39 million Americans living below the poverty line, trying to force the Chinese to increase the value of their currency will drive prices up for the poorest of the poor."

For one company owner in Sri Lanka, there are few good alternatives to Chinese materials. "We struggle with rising prices on raw materials like everybody else. With a nearly endless number of national holidays and a less than gung-ho work ethic, Sri Lanka really struggles to compete.

"I don't like Chinese products at all, but do have to admit that the reason they have become the world's biggest economy is pure hard work. Now they are running around the world securing oil and mineral rights everywhere they can in order to keep it all going, while Western countries prioritize human rights issues(and so do I!). It is a difficult dilemma, indeed," he wrote.

Adds a reader who calls himself "Craig": "All of this 'I refuse to pay more' attitude is exactly what the Chinese want -- people's spending habits become dependent on low prices that only China can provide through its effective subsidy on exports. Americans need to grow up and decide whether they are willing to sacrifice a few things in order to compete on the world stage."

CNN's Eunice Yoon and Derrick McElheron contributed to this report