Global Ethics Corner: Chinese Currency and Ethics

Jun 28, 2010

When China loosens the peg of its currency to the dollar, the U.S. will benefit--but it may hurt labor in China. While the looser Chinese currency is fairer to trading partners, it conflicts with protection of Chinese citizens' interests. How would you balance the two concerns?

If China's currency, the renminbi, gets stronger, it buys more foreign goods. They should then become cheaper for Chinese buyers.

Between the U.S. and China, however, the exchange rate does not float freely. Rather, it is fixed by China, often within a narrow band. Economists estimate that the renminbi must get up to 40 percent stronger to reflect real economic conditions.

China announced it would begin to widen the band. This is positive for American exporters, making American goods more competitive in China, but this potentially threatens the jobs of Chinese workers, and risks labor unrest.

Also, the Chinese government and individuals purchased trillions of dollars of U.S. assets. As the Chinese currency gets stronger, when these assets are sold and converted back, they buy fewer and fewer renminbi.

Ethically a government's first obligation is to its citizens, and China forcefully asserts its sovereignty, its duty to protect. Risking of labor unrest and loss of wealth could be dereliction of duty, and are clearly accentuated by a stronger currency.

The contrasting ethical issue involves China's mutual international obligations. Today the international system is not mercantile, designed only to benefit a country's citizens or to "beggar thy neighbor."

Rather, there is a commitment to fairness and a standard of reciprocity built into the system. This ethical commitment is also supported by mutual self-interest, i.e. a strong American economy with Americans at work increases Chinese exports.

What do you think? Protection of citizens and reciprocal fairness seem to conflict. Both are driven by ethical and pragmatic considerations. How would you balance them?


By William Vocke

You may also like

President Macron at the World Economic Forum's Davos Agenda, January 2021. <br>CREDIT: <a href="https://www.flickr.com/photos/worldeconomicforum/50877135273">World Economic Forum/Pascal Bitz</a> <a href="https://creativecommons.org/licenses/by-nc-sa/2.0/">(CC)</a>

MAR 30, 2021 Article

ESG Offers Capacity, Capital, and Consensus for Global Challenges

In this article, Carnegie New Leader Ravipal Bains outlines an environmental, social, and governance (ESG) led reorientation of the global financial system. The core idea ...

Likes. CREDIT: <a href=https://pixabay.com/illustrations/facebook-icon-like-thumb-1084449/>Pixabay (CC)</a>.

JAN 31, 2020 Article

Internet Regulation: The Responsibility of the People

This essay written by Justin Oh is the second prize winner of the high school category in the 2019 student essay contest. What have data and ...

AUG 5, 2019 Podcast

Ethics in Business: In Their Own Words, with IFAC's Kevin Dancey

Kevin Dancey, CEO at the International Federation of Accountants (IFAC), speaks about the role of ethics in accounting. He discusses his organization's diversity, how accounting ...