Not long ago, the economic outlook for small- and medium-size manufacturers in the United States looked problematic. The latest China-U.S. trade talks had ended with little progress on the key issue of the undervalued Yuan, and slow economic growth had led to a decrease in optimism among manufacturing executives. Chinese currency, which is expected to remain intentionally undervalued, creates an immense competitive advantage for Chinese manufacturers, which perhaps feeds the pessimism among industry leaders in the United States.

Professor Peter Morici, who teaches at the Robert H. Smith School of Business at the University of Maryland, explains, “China’s undervalued Yuan provides a 24-percent subsidy to exports, as measured by Beijing’s purchases of dollars and other currencies in foreign exchange markets to maintain an undervalued Yuan.” This mercantile policy, coupled with cheap Asian labor, lowers costs because of less-stringent environmental regulations, and explicit government subsidies gravely challenge the future feasibility of U.S. manufacturing.

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