George W. Bush Administration's New "strong Dollar" Policy Analysis

The new "Strong Dollar" policy pursued by Bush administration after George WBush came to power mainly results from low U.S. economic growth rate, long-termdisequilibrium of balance of international payments, trade and financial deficits,outflow of foreign capital, overvaluation of dollar and election politics. Although thenew "Strong Dollar" policy helps improve trade deficit, it may deteriorate unbalancedU.S. economy, weaken U.S. dollar's prestige and its role as international reservecurrency. The new "Strong Dollar" policy leaves profound influence on worldeconomy, international currency system and financial pattern. Due to dollardepreciation, Europe is floundering, Japan is veering back toward another crisis, andnew market economies face great challenges ahead. A weaker dollar brings bothadvantages and disadvantages to China's economy, presses RMB to rise in value, andexerts certain impact on China's exchange rate policy. China is thus suggested toadjust trade policy to optimize the export and import structure, uphold the principlesof independent initiative, controllability and gradual progress in pursuing RMBexchange rate reform, further optimize currency and assets structure of foreignexchange reserve, consider increasing reserve of such strategic resources as gold andpetroleum. In short, dollar depreciation is just tactical adjustment, while U.S. stillstrategically pursues strong dollar. In this sense, the so-called "Weak Dollar" policy ofBush administration is new "Strong Dollar" policy promoting U.S. national interests.