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China is known as the factory of the world for its export based economy. But western countries have long complained that the Chinese regime is giving Chinese exporters an unfair advantage by purposely keeping China's currency undervalued. US Senate has just voted to allow debate over a new bill that could stamp out China's advantage in US markets all together. But the Chinese regime claim the bill will lead to a trade war between the world's two biggest economies.
On Monday, the US Senate voted 79 to 19 to open up debate on the bipartisan Currency Exchange Rate Oversight Reform Act. The proposed bill would allow the United States government to impose import duties on goods coming from countries known to be undervaluing their currencies. The biggest of these is China.
Estimates suggest the Chinese regime is keeping the renminbi up to 40 percent under-valued, this benefits Chinese exporters. But US policy makers say this gives Chinese manufacturers an unfair advantage in foreign markets.
[Sen. Lindsey Graham, R-South Carolina]:
"If they do something better than us, they should win in the marketplace. That's just the way business works. But if the government intervenes and creates an advantage for a Chinese company, that's not winning in the marketplace."
The Chinese regime was quick to respond, releasing a statement claiming the US is breaking World Trade Organization regulations and harming the trade relationship between the two nations:
"This bill, using 'currency imbalance' as an excuse, escalates the issue of exchange rates a step further, it is a protectionist measure."
But with US unemployment running at 9 percent, US lawmakers are keen to stamp out what they see as an unfair trade advantage.