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.

BREAKING DOWN '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.

  1. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  2. Balanced Trade

    A condition in which an economy runs neither a trade surplus ...
  3. Trade War

    A negative side effect of protectionism that occurs when Country ...
  4. Protectionism

    Government actions and policies that restrict or restrain international ...
  5. Export

    A function of international trade whereby goods produced in one ...
  6. Trade Deficit

    An economic measure of a negative balance of trade in which a ...
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