Considerable controversy surrounds the issue of whether a revaluation of the Chinese currency would help the performance of the US manufacturing sector. It is felt by some that China's currency policies have been in part responsible for eliminating manufacturing jobs in the US, while placing downward pressure on manufacturing wages and output growth. This paper assesses these claims by looking at macroeconomic data on US manufacturing employment, output, and real compensation. It is found that the Chinese yuan does have a statistically significant effect on employment and output growth, but these effects are small in magnitude and thus inconsequential. It is also found that increases in the value of the Chinese yuan lower real hourly compensation in US manufacturing by reducing the purchasing power of the vast majority of workers who retain their jobs. The general conclusion of the paper is that US officials would be better advised to seek market opening initiatives, since exports are found to have a consistently stronger effect on manufacturing performance than general movements in the RMB.
Tamkang Journal of International Affairs=淡江國際研究 15(3) pp.81-141