How ironic, that I was listening to folks songs on the Chinese zither as I read this...

"The U.S. trade deficit ballooned to an all-time high of $617.7 billion last year, pushed by soaring oil prices and [some] Americans' insatiable appetite for everything foreign, from cars to toys and food.

"The Commerce Department reported Thursday that the 2004 imbalance rose 24.4 percent from the previous year, and marked the third year in a row that the deficit had set a record. The imbalance with China swelled by 30.5 percent to $162 billion, the highest ever with any country.

"Democrats said the figures were evidence that President Bush's policy of seeking trade deals was not working. They said the 2.7 million manufacturing jobs the United States has lost over the past four years reflect, in large part, unfair trading practices by China and other countries.

"Sen. Byron Dorgan, D-N.D., said the report was 'devastating news for the American economy.' House Democratic leader Nancy Pelosi of California said the deficits were undermining the U.S. manufacturing base.

"Sen. Charles Schumer, D-N.Y., said the imbalance with China showed the need for his legislation that would impose across-the-board tariffs of 27.5 percent on Chinese products unless Beijing stopped tightly linking its currency, the yuan, to the U.S. dollar.

"American manufacturers says this policy has undervalued the yuan by as much as 40 percent, giving Chinese companies a huge competitive advantage."


So let's go back to a story from last month:

"China has lost faith in the stability of the U.S. dollar and its first priority is to broaden the exchange rate for its currency from the dollar to a more flexible basket of currencies, a top Chinese economist said at the World Economic Forum.

"At a standing-room only session focusing on the world's fastest-growing economy, Fan Gang, director of the National Economic Research Institute at the China Reform Foundation, said the issue for China isn't whether to devalue the yuan but 'to limit it from the U.S. dollar.' But he stressed that the Chinese government is under no pressure to revalue its currency.

"China's exchange rate policies restrict the value of the yuan to a narrow band around 8.28 yuan, pegged to $1. Critics argue that the yuan is undervalued, making China's exports cheaper overseas and giving its manufacturers an unfair advantage. Beijing has been under pressure from its trading partners, especially the United States, to relax controls on its currency.

"'The U.S. dollar is no longer -- in our opinion, is no longer -- (seen) as a stable currency, and is devaluating all the time, and that's putting troubles all the time," Fan said, speaking in English.

The dollar hit a new low in December against the euro and has been falling against other major currencies on concerns about the ever-growing U.S. trade and budget deficits [go back to the top of this post]. The U.S. currency came under some pressure Wednesday, drifting lower versus most currencies including the Japanese yen and the euro, as dealers mulled the Chinese official's statements.

Fan said last year China lost a good opportunity to do revalue its currency, in July and October.

"High pressure, we don't do it. When the pressure's gone, we forgot," Fan said, to laughter from the audience. "But this time, I think Chinese authorities will not forget it. Now people understand the U.S. dollar will not stop devaluating."

See also:

China Poised to Overtake U.S. in 2020s

"Americans must come to grips with the realization that the glitter of the greenback is long gone."