In an answer to a question following a speech on energy to the Economic Club of New York, Federal Reserve Chairman Alan Greenspan said that a decision by China to float the renminbi/yuan would "probably quite unlikely" reduce the US overall trade balance.

Chinese Premier Wen Jiabao with US Speaker of Congress Dennis Hastert

Greenspan said that US companies would likely turn to other countries, such as Thailand or Malaysia for goods, rather than US producers.

"So essentially what we will find is we're importing from a different area, but we will be importing the same goods," Greenspan said.

The Fed Chairman also said that letting the Chinese currency move higher against the dollar would increase prices American shoppers pay for Chinese goods in the United States.

"The effect will be a rise in domestic price in the United States," he said.

Federal Reserve Chairman Alan Greenspan

The United States' trade deficit surged to a record high of $617 billion last year. The deficit with China was $162 billion, up from $83 billion in 2001. The Bush Administration, in response to threats of sanctions by the US Congress, has been pressing China to end its decade old peg of 8.28 currency link to the US dollar.

Chinese Premier Wen Jiabao said last Monday that China regards the reform of the exchange rate of renminbi as an issue of sovereignty and will never yield to any external pressure to change it. 

Trade with China : 2004

NOTE: All figures are in millions of U.S. dollars.

Month	Exports	Imports	Balance
January 2004	2,593.1	14,069.7	-11,476.6
February 2004	3,033.7	11,314.8	-8,281.1
March 2004	3,372.5	13,807.9	-10,435.4
April 2004	2,718.2	14,695.2	-11,977.0
May 2004	2,895.6	15,026.1	-12,130.5
June 2004	2,732.5	16,931.7	-14,199.2
July 2004	2,662.1	17,562.6	-14,900.5
August 2004	2,682.0	18,068.4	-15,386.4
September 2004	2,855.6	18,376.3	-15,520.7
October 2004	2,941.4	19,717.7	-16,776.4
November 2004	2,975.1	19,605.7	-16,630.7
December 2004	3,259.2	17,522.9	-14,263.6
TOTAL	34,721.0	196,699.0	-161,978.0

Trade with China : 2005

NOTE: All figures are in millions of U.S. dollars.

Month	Exports	Imports	Balance
January 2005	2,609.2	17,863.7	-15,254.5
February 2005	3,082.4	16,953.6	-13,871.2
March 2005	3,305.4	16,209.5	-12,904.2
TOTAL	8,997.0	51,026.8	-42,029.9

'TOTAL' may not add due to rounding.

• Table reflects only those months for which there was trade.
• CONTACT: Data Dissemination Branch, U.S. Census Bureau, (301) 763-2311
• SOURCE: U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washignton, D.C. 20233

The following is a transcript of Greenspan's speech on Friday:

Over the past twenty years, the American economy has absorbed the major shocks of two stock market slumps, the terrorist attacks of September 11, and debilitating corporate scandals. But we have also been subjected to other shocks, the most immediately prominent ones being the oil and gas price surges of the past two years. Indeed, most analysts attribute the economic soft spots of the past two years to energy shocks. Accordingly, I will devote the rest of my formal remarks to developments in oil and gas markets, and I will endeavor to address broader issues of the world economy in the question and answer period.

* * *

World markets for oil and natural gas have been subject to a degree of strain over the past year not experienced for a generation. Increased demand and lagging additions to productive capacity have combined to eliminate a significant amount of the slack in energy markets that was essential in containing energy prices between 1985 and 2000.