In addition, the value of the renminbi trended upwards after the 1994 exchange rate reform. As the supply of foreign exchange exceeded market demand, the renminbi appreciated slightly thereafter, so that the value of the renminbi rose from 8.7 to 1 in 1994 to 8.27:1 in 1998 and 1999, an appreciation of 4.8% (see Table 4). The Chinese protocol package will contain a provision in our 1997 bilateral textile agreement that will allow U.S. companies and workers to respond to increased imports of textile and apparel products. This textile guarantee will remain in force until 31 December 2008, when the WTO Agreement on Textiles and Clothing expires. In any case, the US trade imbalance with China is significantly smaller than Japan. There is no reason to make the trade issue a hostage in the domestic struggle of the supporters of the United States, and therefore Sino-U.S. to poison. political relations. The question of the method of calculation is complex.
Both China and the United States can discuss how to unify the two different principles in the calculation of bilateral trade flows. Multilateral negotiations on “harmonized rules of origin” are under way in the WTO, but they are not yet complete. Any unilateral exaggeration and politicization of this issue would not promote the resolution of bilateral trade problems. In addition, as part of the agreement, the United States has managed to put in place a number of special rules to protect against the possible sudden influx of Chinese imports through so-called safeguard measures. Under current WTO rules, nations can introduce safeguard measures for a period of four years, which can be renewed once. They cannot use individual nations to take special measures and they must gradually end protection. However, under the US-China agreement, the US forced China to accept this highly protectionist action for twelve years (in the textile sector for nine years). After all, for the first time in three decades, China`s leaders are facing the problem of price deflation. The underlying problem was overinvestment in many sectors, which led to overcapacity and a tendency for producers to lower prices to sell enough products to cover the costs of their labour and other variable inputs.
Thus, price deflation in China is for some critical products like steel long before the Asian financial crisis. But this crisis significantly deepened the deflationary trend, since China`s fixed exchange rate against the US dollar meant that deflation was imported into China elsewhere in the region. . . .
