When more is too much...

http://news.bbc.co.uk/2/hi/business/6578289.stm

This is an interesting article about China's economy. We all know how much developed economies rely on cheap labor from the East. China is a leading supplier of that cheap labor. As I learned from the article they export annually goods worth 100 billion dollars. Impressive sum, hugh? I guess that this value is calculated from the export prices and not what we, as consumers, pay for it :)

I always thought that cheap labor is enough to lower the prices of the goods to minimum. It turns out that China also controls its currency- yuans. They lower the value of yuans to keep the products cheap and boost the export.

"US trade organizations have argued that by not letting the currency float freely, it gives Chinese firms an unfair edge on US companies, by making Chinese consumer goods artificially cheap."

US trade organizations oppose techniques used by Chinese government. My first thought was that it doesn't make much sense. US trade organizations would want to buy cheap goods and sell them for higher prices to Americans. The catch is that US is a big exporter as well. It is one of the reasons for America being the biggest economical power in the world. In today’s situation, because of Eastern markets, this position is endangered. It is now understandable why USA wants to cool down the pace of Chinas economical growth.

The trade organizations are upset so much, that they are trying to influence foreign economies to reform their currencies. Isn't that a great example of how international the trade is nowadays? A little bit scary but that’s capitalism.

I sometimes wonder what 18th and 19th century economists would say about modern economy. Is that what they thought would happen as a result of free international trade?