- FMA
- The Fabricator
- FABTECH
- Canadian Metalworking
Categories
- Additive Manufacturing
- Aluminum Welding
- Arc Welding
- Assembly and Joining
- Automation and Robotics
- Bending and Forming
- Consumables
- Cutting and Weld Prep
- Electric Vehicles
- En Español
- Finishing
- Hydroforming
- Laser Cutting
- Laser Welding
- Machining
- Manufacturing Software
- Materials Handling
- Metals/Materials
- Oxyfuel Cutting
- Plasma Cutting
- Power Tools
- Punching and Other Holemaking
- Roll Forming
- Safety
- Sawing
- Shearing
- Shop Management
- Testing and Measuring
- Tube and Pipe Fabrication
- Tube and Pipe Production
- Waterjet Cutting
Industry Directory
Webcasts
Podcasts
FAB 40
Advertise
Subscribe
Account Login
Search
Much ado about nothing
- By Eric Lundin
- September 15, 2010
- July 2007: 7.6055 per dollar (5% change in 12 months)
- July 2008: 6.8608 per dollar (10%)
- July 2009: 6.83307 (0.4%)
- July 2010: 6.78099 (0.8%)
On Monday, Sept. 13, it was 6.76182 per dollar, and it appeared that China was letting it appreciate steadily for a few days on the brink of two days of Congressional hearings on China's policy of currency manipulation.
Many say that China’s currency is undervalued, making Chinese prices artificially low, and the currency should appreciate more, thereby leveling the international playing field. Another route is to retaliate against China through tariffs or other trade barriers.
This seems to be a bad time to throw a third wrench into the works. Third wrench, you ask? Yes, third wrench. Late last week I had a conversation with a fabricator and OEM—one who wishes to remain anonymous, by the way—about the intermediate goods it purchases from a vendor in China. The cost for the material it purchases has risen by 20 percent in just a few months. The two main culprits driving the prices of Chinese goods higher are wage increases and energy rationing.
Higher pay has been a topic for months. Labor strikes in China in May led to pay increases from some employers in early June, followed by minimum wage increases in July in some localities.
In a separate development, local governments throughout China have been rationing power recently for two reasons: to reduce the country’s power consumption and to cut emissions.
It doesn’t take an accountant to understand that the first wrench, higher wages, leads to higher prices. And it doesn’t take an economist to understand that restricting the supply of a good or service leads to a bidding war, which also pushes up prices.
Enough with the detail. Let’s take a step back and look at the issue from a broader perspective. The U.S. economy is the largest in the world; our GDP, the measure of final goods and services, is estimated to be $14.8 trillion. China’s is in the No. 2 position at $5.4 trillion. As far as trade goes, the U.S. and China are tightly intertwined. Companies in the U.S. imported $194 billion in goods from Chinese companies in the first seven months of 2010; trade going the other direction amounted to $49 billion, January to July. Regarding imports, China is our biggest trading partner; for exports, China is our third-largest trading partner (behind Canada and Mexico).
I doubt much will come from the congressional hearings. Like it or not, the two economies are closely linked and even small changes can have big repercussions. Chinese prices are cruising upward for domestic reasons, and political pressures from the U.S. to force a change in the exchange rate would put unwelcome stresses on both economies.
subscribe now
The Fabricator is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The Fabricator has served the industry since 1970.
start your free subscriptionAbout the Author
Eric Lundin
2135 Point Blvd
Elgin, IL 60123
815-227-8262
Eric Lundin worked on The Tube & Pipe Journal from 2000 to 2022.
- Stay connected from anywhere
Easily access valuable industry resources now with full access to the digital edition of The Fabricator.
Easily access valuable industry resources now with full access to the digital edition of The Welder.
Easily access valuable industry resources now with full access to the digital edition of The Tube and Pipe Journal.
Easily access valuable industry resources now with full access to the digital edition of The Fabricator en Español.
- Podcasting
- Podcast:
- The Fabricator Podcast
- Published:
- 04/16/2024
- Running Time:
- 63:29
In this episode of The Fabricator Podcast, Caleb Chamberlain, co-founder and CEO of OSH Cut, discusses his company’s...
- Trending Articles
AI, machine learning, and the future of metal fabrication
Employee ownership: The best way to ensure engagement
Steel industry reacts to Nucor’s new weekly published HRC price
Dynamic Metal blossoms with each passing year
Metal fabrication management: A guide for new supervisors
- Industry Events
16th Annual Safety Conference
- April 30 - May 1, 2024
- Elgin,
Pipe and Tube Conference
- May 21 - 22, 2024
- Omaha, NE
World-Class Roll Forming Workshop
- June 5 - 6, 2024
- Louisville, KY
Advanced Laser Application Workshop
- June 25 - 27, 2024
- Novi, MI