A Wink at China Inc.

It's becoming rarer these days to buy a small manufactured product that isn't made in China. Exports from China to the US have more than doubled in five years, bringing low-priced goods to consumers and unemployment to many American workers in low-tech jobs.

Most of those goods, ironically, are made in US-owned factories whose workers are among the lowest-paid in the world. And China's ballooning trade surplus with the US has become so large that China is forced to spend the excess dollars it earns buying up more US debt, making Wall Street's welfare ever more dependent on China's current cash flow.

But China's low wages aren't the only reason it's an export dragon. Like many Asian nations that have thrived by selling goods in the relatively open US market, China has not let its currency "float" freely, preferring instead to peg the yuan, as it's called, closely to the dollar since 1994.

This antimarket tactic is unfair, say many of America's jobless workers, manufacturers, and increasingly, politicians. Now the Bush administration has quietly suggested that China revalue its currency to make its exports more expensive.

The US, however, can hardly badger Beijing while it's dependent on China's goodwill in reining in North Korea's nuclear program. And China claims that, to keep itself stable, it needs to support its export industries to generate millions of jobs for peasants migrating to cities.

Still, US Treasury Secretary Snow may visit China next month to make the point. The same kind of pressure was applied to Japan in 1985 when its exports were seen as a threat. Japan Inc. buckled then, raising the value of the yen while also pumping cheap loans into the economy. That market bubble popped in 1990, and Japan has been stuck in a slump ever since.

China shouldn't repeat Japan's mistake with a dramatic yuan revaluation. Small steps to broaden the trading range of the yuan, reducing subsidies to exporters, and pegging the yuan to a "basket" of several currencies could help China slowly move from an export-driven model to one based on domestic demand.

Even a 40 percent rise in the yuan, as is possible in a true float, probably won't bring back American low-tech jobs. Globalized US companies will just move to other low-wage countries. And many of those firms are in China mainly to tap that huge market.

China-bashing could backfire on the US, while pushing China to not act in its own best economic interest.

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