Introduction US politicians have made numerous calls for China to allow its currency to float freely. Critics have pointed out that China's policy of manipulating its currency by preventing its appreciation has given its manufacturers an unfair advantage. Both goods sold domestically and exported by Chinese producers are relatively cheaper than those by producers from economies whose Chinese currency is undervalued; especially the United States. This has been blamed for contributing largely to the US's large annual trade deficit. Probably due to pressure, China allowed its currency to appreciate. For example, it allowed its currency to appreciate against the US dollar by 21% over the period July 2005-2008 (although it still had a US trade surplus of 30.1). Although it halted appreciation due to the global financial crisis, it subsequently allowed its currency to appreciate against the US dollar at a slower rate of 6% through June 2010 and August 2011 (Morrison & Labonte, 2011 ). What would be the real The impact of the appreciation of the Chinese currency on the two economies (China and the United States) is the question that needs to be answered. There are already conflicting opinions on the real benefits of such a scenario. In the case of China, it has been argued that an appreciation would harm the competitiveness of its exports. In the case of the United States, the expected benefits of a stronger currency are undermined by what opponents describe as a potential increase in the price of Chinese exports that would consequently affect American consumers and companies that use parts and components produced by China . Likewise, a stronger currency could limit investors' ability to purchase U.S. assets (Morrison & Labonte, 2011). Considering the mixed report... half the paper... current trade deficit. Yes, there will be benefits associated with increasing the global competitiveness of U.S. products. However, there are other factors not associated with the Chinese currency that impact the global trade competitiveness of the United States. A case in point is the fact that from 2005 to 2008, when China allowed its currency to appreciate 21%, there was still a 30.1% increase in the US trade deficit with China. Furthermore, by placing further pressure on China to devalue its currency, the United States runs a serious risk of losing capital inflows from Chinese investors in particular. Works Cited Morrison, W. M., & Labonte, M. (2011). The Chinese currency: an analysis of economic issues. Congressional Research Services Report. Retrieved December 14, 2011, from http://www.fas.org/sgp/crs/row/RS21625.pdf.Murshed, S. M (1997). Macroeconomics for open economies. London: Dryden Press.