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.

RELATED TERMS
  1. Tariff War

    An economic battle between two countries in which Country A raises ...
  2. Soft Currency

    A currency with a value that fluctuates as a result of the country's ...
  3. Joint Float

    Two or more countries agreeing to keep their currencies at a ...
  4. Currency

    Currency is a generally accepted form of money, including coins ...
  5. Balanced Trade

    A condition in which an economy runs neither a trade surplus ...
  6. Currency Appreciation

    An increase in the value of one currency in terms of another. ...
Related Articles
  1. Markets

    Benefits From A Tango Of China-US Trade and Debt

    China has been accumulating US debt for many decades. Here's why it continues to do so, and the risks and benefits of this for both the US and China.
  2. Markets

    4 Ways China Influences Global Economics

    Learn the four ways China's economy can influence the global economy. The recent decline in Chinese stock markets should be the least of your worries.
  3. Markets

    Impact of the Chinese Economy on the U.S. Economy

    The economic growth of China has been decreasing since 2010. What impact does this have on the US and the world economy?
  4. Markets

    4 Economic Challenges China Faces in 2016

    Learn about the four economic challenges China faces in 2016 and what China's leaders plan on doing to tackle a slowing economy and high corporate debt.
  5. Trading

    Main Factors That Influence Exchange Rates

    The exchange rate is one of the most important determinants of a country's relative level of economic health, and can impact your returns.
  6. Markets

    How China Makes Money (PFE, GSK)

    China has the first or second largest GDP in the world but is not nearly as developed as others in the top 10.
  7. Markets

    Why U.S. Investors are Concerned About China

    Since the U.S. and China's economic relationship is so extensive, the recent Chinese turmoil has elicited fear in the eyes of U.S. investors.
  8. Markets

    Why Countries Keep Reserve Currency

    Central banks and financial institutions hold large amounts of foreign money as their reserve currency.
  9. Markets

    Slow Growth in China to Affect Asia-Pacific

    As China's growth slows, it will affect different countries in the Asia-Pacific region differently.
  10. Markets

    How Fed Rate Hikes Cause Contagion Risk Around the World

    Learn about the economic problem facing emerging markets, including China. Discover why these economies must transition and reform to avoid economic crisis.
RELATED FAQS
  1. What is foreign exchange?

    Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
  2. What are key benefits to a country that has engaged in a policy of currency depreciation?

    Learn about key benefits to a country engaging in a policy of currency depreciation, such as smaller trade deficits, employment ... Read Answer >>
  3. How does inflation affect the exchange rate between two nations?

    Understand how inflation can affect foreign exchange rates of a currency and how it is just one of many economic factors ... Read Answer >>
  4. What is the difference between a nation's current account deficit and its currency ...

    Learn the respective meanings of the two terms, current account deficit and currency valuation, and understand the relationship ... Read Answer >>
  5. What economic indicators are most used when forecasting an exchange rate?

    Discover what economic indicators are most widely used to forecast a country’s exchange rate and how various factors influence ... Read Answer >>
  6. How do changes in national interest rates affect a currency's value and exchange ...

    Understand the role that changes in interest rates can play in determining the value and foreign exchange rate of a country's ... Read Answer >>
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center