China Currency Bill

Definition of 'China Currency Bill'


A potential law passed in September 2011 by the U.S. Senate that would add tariffs to countries - most notably China - found to be undervaluing their currency. The China currency bill's intent is to make imports more expensive from these countries, evening the trade deficit and decreasing the countries' unfair economic advantage. It is a controversial bill because China holds enormous economic clout, as it's one of the U.S.'s top trading partners, and also holds a lot of U.S. debt.

Investopedia explains 'China Currency Bill'


There is fear that if the China currency bill passes the House and becomes law, China will respond in kind and spark a trading war with the U.S. and cause another recession. The belief is that if countries, such as China, that artificially peg their currency to the U.S. dollar were to let their currency freely float on the foreign exchange market, their currency would appreciate to reflect their growing economy, making labor and the cost of goods more expensive to import. This would help stem the loss of jobs to countries where production is cheaper.



comments powered by Disqus
Hot Definitions
  1. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  2. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  3. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  4. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  5. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  6. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
Trading Center