More than Cheap Talk: U.S. Campaign Rhetoric and China's Currency Reform

Abstract

Is China-bashing on the campaign trail more than just “cheap talk”? If campaign appeals are reliable indicators of future legislative activity, then democratic signals may be less noisy than cynics complain, adding micro-level evidence of democratic credibility in international politics. While not the intended audience of campaign ads, Chinese policymakers may overhear and draw inferences about U.S. policy. We show that when challengers attacked on the campaign trail during the 2010 midterm elections, successful challengers and victorious incumbents were subsequently more likely to sponsor anti-China legislation. Moreover, China recognized that Congressional attention to China’s exchange rate put pressure on the White House as the election approached, affecting the timing of Chinese revaluation to prevent an international confrontation. Using time series data over the 110th-112th sessions of Congress, we show that increases in congressional activity were associated with increases in the Chinese exchange rate.

Keywords: signaling, campaign ads, China, Congress, democracy, exchange rate, cosponsorship, cheap talk