China-bashing in U.S. presidential campaigns not only pushes the President to take tough policy stands towards China but also results in responses from China.
Using the case of currency manipulation, I find that the Chinese government is more likely to allow for appreciation of its currency (Yuan) when there are more trade and currency related China-bashings by presidential candidates. As shown as the Figure below, over the course of the 2012 presidential campaign, China’s currency (Yuan) went up steadily during the period when China-bashing was heavily used in candidates’ speeches, debates and ads, particularly since September when the amount of China-bashing had been increased.
By contrast, the Yuan depreciated in the summer (June to August), as there was less China-bashing by presidential candidates during the period.
Apparently, as powerful as the statement of U.S. president, China-bashing by presidential candidates plays a great role in shaping the behavior of the Chinese government.
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