China Currency Bill

AAA

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.

RELATED TERMS
  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. Trade Deficit

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

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

    A function of international trade whereby goods produced in one ...
RELATED FAQS
  1. How will a value added tax impact the government budget?

    In 1992, the Congressional Budget Office conducted an economic study on value-added tax, or VAT. At the time, the CBO concluded ... Read Full Answer >>
  2. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  3. How does neoclassical economics relate to neoliberalism?

    While it may be likely that many neoliberal thinkers endorse the use of (or even emphasize) neoclassical economics, the two ... Read Full Answer >>
  4. What regulations exist to protect infant industries?

    There are far more protections of once-infant and now-dominant industries in the United States than regulations designed ... Read Full Answer >>
  5. What are the main risks to the economy of a country that has implemented a policy ...

    The main risk to the economy of a country that has implemented a policy of austerity is the potential for a self-reinforcing, ... Read Full Answer >>
  6. How does protectionism affect gross domestic product (GDP?)

    The vast majority of economic literature suggests that protectionist policies reduce the gross domestic product, or GDP, ... Read Full Answer >>
Related Articles
  1. Forex Education

    Why China's Currency Tangos With The USD

    Investopedia explains: It takes two to tango, but unless both partners move in perfect cohesion, a sequence of graceful maneuvers can be reduced to a series of clumsy moves. The latter depiction ...
  2. Economics

    The Basics Of Tariffs And Trade Barriers

    Everything you need to know - from the different types of tariffs to their effects on the local economy.
  3. Forex Education

    The Pros And Cons Of A Pegged Exchange Rate

    A pegged currency can give a country many advantages, but these advantages come at a price.
  4. Economics

    Twin Deficits: Twice The Fun For The U.S

    The U.S. has been running both fiscal and current account deficits for years, but what does it all add up to?
  5. Economics

    In Praise Of Trade Deficits

    When a country imports more than it exports, is it a recipe for disaster or just part of a larger cycle?
  6. Economics

    What Should Everyone Know About Greece’s Debt

    We weigh in on the top four things everyone should know about Greece's debt.
  7. Economics

    Explaining Protectionism

    Protectionism is government measures that limit imports into a country to protect commerce within that country against foreign competition.
  8. Professionals

    The Coming Stock Market Decline: What to Expect

    Many big investors are fearful of a market decline. Even if they're correct there is always a way to profit.
  9. Insurance

    Why Is Health Care So Expensive In The Us?

    The U.S. is the world leader in only one area of health care: costs. Why is it so hard to rein in these expenses?
  10. Economics

    The Most Likely Outcome For Greece

    After more than five years of a Greek drama, most of us have become fatigued with hearing about Greece’s debt problems, the one issue that won’t go away.

You May Also Like

Hot Definitions
  1. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  2. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  3. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  4. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  6. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!