The International Dollar Credit Standard And Trade Balance Between China And The United States

The development of bilateral trade between China and the United States, two of the largest economies in the world, has attracted much attention. In recent years, the trade deficit of the United States keeps growing. According to most of the politicians, manufacturers and some scholars of the United States, this trend is the result of China's Trade Protective Policies. They believe it will have negative effects on the U.S. economy, including the increase of unemployment in manufacturing industry, the imbalance of the economic structure, etc. Therefore, they suggest that China should reevaluate RMB and impose the Anti-allowance Tax on the exported goods.The pressure from the United States reinforced the expectation of the appreciation of RMB, which brought many troubles to the sustainable development of China's economy. So it is of great importance to cope with the pressure of RMB appreciation from the United States properly.On the basis of the characteristics of international standard currency and the analysis of different experts, this paper holds that the present international monetary system is just the International U.S. Dollar Credit Standard System, and U.S. Dollar is the international standard currency. This fact strengthened the economic hegemony of the United States and benefited it a lot.Because U.S. Dollar's role as the international standard currency has some negative effects on other countries'economies, with the depreciation of U.S. Dollar since 2002, it faces more and more challenges. For example, euro is expected to be used in petroleum trade by OPEC countries; Iran has established a Petrol Exchange with euro as the payment currency. Moreover, Russia also proposes ruble may take the place of U.S. dollar in petroleum trade, and actually it has done like that in bilateral trade of petroleum and natural gas. Additionally, U.S. dollar as primary international reserve currency is facing the challenge from euro. However, as a result of the strong political, economic and military influence of the United States and the healthy growing of the U.S. economy, U.S. Dollar's role as the international standard currency will not be replaced in the near future.As for the trade deficit of the United States, this paper believes that neither the so-called Trade Protective Policy, nor the foreign exchange rate monopoly of the Chinese government is one of the causes. Actually it is based on the fact that the saving rate is lower than the investment rate in the United States and the transference of assembly industry to China in east Asian area. Besides that, the trade deficit of the United States springs from the International U.S. Dollar standard. The author finds that few scholars in the past paid attention to it when they studied the durative increase of the U.S. trade deficit especially with China except Robert Mundell who clealy mentioned the U.S. Dollar Credit Standard .Following the study of Mundell and some domestic scholars, this paper holds that the demand of U.S. dollar from other counties may lead to trade deficit of the U.S.A on the condition of U.S dollar as the International Standard currency. Simultaneously, the currency's oversupply in U.S.A aggravates its trade situation. And, on the real conditions of trade between China and American, the author proves that the U.S. dollar credit standard is the major cause of increasing U.S. trade deficit with China. Finally, this paper analyses the relationship among the international U.S. dollar credit standard, low saving rate in U.S. and transference of assembly industry from east Asian areas to China and concludes it is above-mentioned related ones which directly caused the imbalance of Sino-American trade.Many Americans believe the trade between China and the United States has brought big troubles to their country, such as the increase of the unemployment in manufacturing industry. However, according to the studies, America's trade deficit had no direct connection with the unemployment. Moreover, the United States got more from the Sino-American trade than it paid. As for China, it did get economic benefits from the exportation to America, but it ran into trouble in the mean time, esp. the pressure of the appreciation of RMB from the United States, which needs to be handled properly, otherwise China will have more troubles. Since RMB exchange rate is not the major reason of American trade deficit and American can gain more in trade with China, why U.S. still puts pressure on appreciation and floating rate of RMB? In fact, the real motivation of U.S. is not simple as being expressed in public. At least , it includes U.A. government expects China would lighten the burden of their economic adjustment; for politicians, they can win the support from voters while manufacturer groups hope to decrease the unemployment rate through this trade deputes; The authorities of Washington will realize their aim of curbing China's economy rapid growth during this progress. Consequently, U.S. government and related groups won't choose to abandon this strategy easily.Under the International U.S. Dollar Credit Standard System, facing the problems caused by America's trade deficit to China, the Chinese government could require the American government to assume its responsibilities. At the same time, it should adjust the domestic policies actively, so as to cope with the changes of the international situation. For example, it should try to promote the demands in domestic market to accelerate the development of national economy.