Cheng Siwei: Dollar’s Downward Trend Will

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    Cheng Siwei, the former vice chairman of the Standing Committee of the National People’s Congress and noted scholar, claims that the recent rise of the U.S. dollar is just temporary, and will not change its long-term downward trend. Cheng says that since the financial crisis broke, many U.S. companies have gone bankrupt or are on the verge of bankruptcy. They have sold their properties in foreign countries and pulled the money back onshore. Therefore short-term demand for the U.S. dollar increased sharply, resulting in appreciation. However, if the U.S. government continues to tackle the crisis by increasing the currency supply, the dollar will begin to depreciate again. He points out: “Weakening the dollar is good policy for the U.S. in the near-term, but not in the long-term.” From a short-term perspective, depreciation boosts America’s exports, as well as helping to export inflation. However, in the end a weaker dollar will erode the purchasing power of Americans and raise the costs of manufacturing.