| Asia in recent years has experienced a major surge in | | | | Asian region as a whole, as there has been recent |
| the demand for its manufactured goods from the | | | | speculation that China's monetary policy, one of its |
| world's largest markets in the United States and Japan. | | | | most effective trade tools, might be imitated by other |
| One sector which has benefited from this increase in | | | | countries in the region. China's monetary policy works |
| demand is furniture. For example, in 1990 the United | | | | to preserve the relative differences in cost between |
| States, the largest market for imported furniture, | | | | its own producers and those located within its target |
| purchased about 1.7 billion dollars worth of furniture | | | | market, the United States. |
| from Asian nations. In the year 2000 this number had | | | | China, until recently, pegged the value of its currency to |
| grown to over 7 billion and by 2004 had nearly doubled | | | | that of the American dollar. This meant that China's |
| over these four years. | | | | Central Bank adjusted the appreciation or depreciation |
| Breaking this trend down by nation, China and the | | | | of its currency to match that of the dollar, thus |
| Association of South East Asian Nations, "ASEAN", (of | | | | preserving the relative exchange rate within a certain |
| which Indonesia, Malaysia, the Philippines are major | | | | percentage band (in this case +/- 3% per day) |
| members) were responsible for the most gains, while | | | | determined beforehand. |
| demand held steady for imports from Korea and | | | | In response to pressure from the United States, China |
| Japan, and Taiwan actually experiencing a decline in | | | | recently changed its monetary policy to peg its |
| demand for its furniture exports. It is here to that we | | | | currency to a "basket" of currency to include Euro, the |
| can clearly begin to see the reasons for this disparity. | | | | Yen, and the South Korean Won in addition to the |
| More developed nations like Japan, Korea, and Taiwan | | | | dollar. It is widely predicted, however, that this will have |
| experienced appreciation in their currencies which | | | | little overall effect on the relative value of the Chinese |
| have brought with them attendant rises in labor costs. | | | | currency to the US dollar, since not only is a majority |
| China remains an exception to this; while it is also a | | | | of the basket likely "weighted" by the dollar, but there is |
| highly developed nation it has been careful to control | | | | also little reason to believe that China has changed the |
| the appreciation of its currency. | | | | composition of its reserves to contain less dollars. |
| Japan, Taiwan, and Korea also lack large domestic | | | | Neither is it necessary or likely that the Chinese Central |
| supplies of the raw materials necessary for the | | | | Bank will stop performing the majority of its |
| manufacture of furniture, while China and ASEAN are | | | | interventions in dollars. |
| again the exceptions. These resources include such | | | | As China's neighbors look to the success of its |
| materials as timber, metal (steel and aluminum), and | | | | monetary policy some are exploring the idea of |
| organic fibers and fabrics. With China and ASEAN | | | | imitating it. The most likely candidates would be the |
| already accounting for 92% of all Asian furniture | | | | larger and longer standing ASEAN member nations |
| imports in the United States by 2004, it is easy to see | | | | such as Indonesia, Malaysia, the Philippines, and |
| that the dual advantage of inexpensive labor and | | | | Singapore who have the most to gain. These countries |
| plentiful local supply of raw materials are keys to their | | | | in particular share some of the advantages of China, |
| success as compared with other exporters in the | | | | such as low-cost domestic labor which they may seek |
| region. | | | | to maximize by shifting their monetary policies. This |
| In fact, the difference in cost of production between | | | | may also influence Korea and Japan to make a similar |
| China and the ASEAN and its other regional | | | | shift in policy in order to remain competitive in the |
| competitors is so pronounced that Japan has actually | | | | region. |
| become a major importer of Asian manufactured | | | | With China signaling its willingness to adjust its |
| furniture. Moreover, Taiwan has had to entertain the | | | | monetary policy, and with its regional trade partners |
| idea of leaving the market of manufactured wooden | | | | looking to do the same, there is an array of possibilities |
| furniture and is begining to produce furniture containing | | | | in which this change might be implemented. Perhaps |
| more metal. China however also possesses large local | | | | the most reasonable and advantageous for all parties |
| supplies of inexpensive steel which should provide a | | | | would be for the nations to peg their currency to a |
| challenge to potential future Taiwanese competitors. | | | | common regional "basket". Doing so would not only |
| It may be that the only risks to Chinese and ASEAN | | | | strengthen these countries' economic ties to one |
| dominance as suppliers for the demand for Asian | | | | another, but on the whole would have the effect of |
| furniture in the United States may be the United States | | | | further reducing any instability in the exchange rate of |
| itself. In recent years the domestic producers of many | | | | China, this being a key factor in the attractiveness of |
| manufactured goods in both Europe and the United | | | | China's exports. Such a move would also make it |
| States have reacted hostilely to competition from Asia | | | | easy if at some future date these countries decided to |
| in general and China in particular. Unable to compete, | | | | enter a monetary union along the lines of the European |
| the domestic industries in these major import markets | | | | Union, helping to create a strong regional partnership |
| have formed powerful political lobbies with the aim of | | | | which would help the Asian nations to accentuate their |
| increasing import duties on a wide variety of Asian and | | | | advantages in the global marketplace. Furthermore it is |
| Chinese goods. As recently as November of 2005, the | | | | worth noting China's recent moves to strengthen |
| powerful American textile lobby managed to win more | | | | intra-regional trade relations in Asia in a larger context. |
| protections though the Committee for the | | | | This is important because aside from the United |
| Implementation of Textile Agreements, "CITA", an | | | | States and Europe, trade between the Asian nations |
| organization with unilateral authority to pass such | | | | accounts for a large portion of their exports. |
| tariffs. | | | | Even in its current state, however, the nations of Asia |
| In the context of global furniture trade, Asia also | | | | show the potential to remain strong competitors in the |
| shows healthy signs of growth with respect to its | | | | global furniture export market. They already supply |
| other international competitors. Of all furniture imported | | | | more than half of the imported furniture to the single |
| into the United States in 2004, more than 50% was | | | | largest market in the world, the United States, and |
| from Asia. This number was up from just under 40% | | | | showing no signs of abating. Asia has shown that it |
| four years earlier resulting from a roughly 90% | | | | has the formula for success. |
| increase in Asian furniture imports into the United | | | | By combining low labor costs and large local supplies |
| States. Compare this to an increase in 34% from | | | | of timber, leather, metal and the other raw materials |
| Mexico, 3% from Canada, and an increase of just | | | | used to manufacture furniture, strong infrastructure |
| 0.7% from the EU over the same period. Taken as a | | | | investments, and a stable monetary policy, Asia as a |
| function of both volume and rate of increase, Asia is | | | | whole has demonstrated that it will be an efficient |
| clearly the fastest growing exporter of furniture to the | | | | supplier for the world's large demand markets well into |
| United States. | | | | the future. |
| This all is good news, not just for China, but for the | | | | |