As every cloud has a silver lining, the recession and the resulting weakness in the dollar has been a boon for American manufacturers. Exports surged 21% to $1.28 trillion in 2010, and the American manufacturing sector added jobs for the first time since 1997.
Unfortunately, as long as the renminbi (RMB) remains pegged to the dollar, weakness in the dollar is synonymous to a weak currency in China. While the recent détente in Sino-American relations has drawn focus away from the “managed float” of the RMB, the effects of this peg are rippling through both the American and Chinese economies. Inflation is building in China as foreign exchange reserves and M2 have surged as the American-Chinese trade deficit surpassed $273 billion in 2010
Chinese exchange rate policies directly impact the competitiveness of American renewable energy manufacturers. One underlying similarity across the multi-faceted renewable energy sector, from wind to solar to fuel cells and beyond, is that each technology is still in its nascence. Unlike more established industries where low-cost Chinese suppliers have come to provide components or assembly to higher value-add Western manufacturers, supply chains remain flexible and American products compete directly with Chinese on both function and cost.