China adamant on yuan
2010-03-17 09:18:13Source:Global TimesAuthor:
The Ministry of Commerce Tuesday rejected intensified calls by US lawmakers for a stronger yuan, saying trade surplus is not caused by the foreign exchange rate.
"Politicizing the exchange rate issue wouldn't be helpful to the coordinated efforts tackling the economic crisis," ministry spokesman Yao Jian told reporters in Beijing.
The trade surplus is an outcome and phenomenon of globalization, Yao said, urging the United States to be an advocator of free trade rather than obstructer.
"The United States ... shouldn't ask others to raise their currency for the sake of its own export expansion. That would be an egotistical practice," Yao said.
The remarks came a day after a group of 130 bipartisan Congressmen dramatized the blame game by signing a letter to Treasury Secretary Timothy Geithner and Commerce Secretary Gary Locke, demanding the Obama administration identify Beijing as a currency manipulator in a report due next month.
The US Treasury has not labeled China as a state that manipulates its currency, the renminbi, since 1994.
"Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors… The devaluation of the RMB also exacerbates the al-ready severe U.S.-China trade deficit," says the letter posted on the website of Congressman Mike Michaud.
In a bid to push US President Barack Obama, who urged China Thursday to adopt a "market-oriented" exchange rate, the US legislators said in the letter that the cheap yuan undermines the competitiveness of US exports to China and also called the Treasury to engage China in negotiations and suggested it should file a formal complaint with the World Trade Organization.
China's major trading partners claimed the yuan was kept artificially low to boost exports. But Beijing, the world's biggest exporter, stood determined against mounting foreign pressure for currency appreciation.
Premier Wen Jiabao said Sunday that he did not believe the yuan was undervalued and Beijing will stick to a "stable yuan". But He acknowledged the willingness to push ahead reform of the yuan's exchange rate mechanism.
Zhao Xijun, deputy dean of the School of Finance at the Renmin University of China, said the exchange rate of the renminbi should be decided by the country's macroeconomic situation, international payment balance and the supply and demand of currencies in the market.
"The foreign exchange mechanism has become more and more flexible and marketized since a major reform took place in 2005," Zhao said.
China began its currency reform by unpegging the yuan from the US dollar in July 2005. The yuan since appreciated 21 percent against the US dollar, or 16 percent in real terms, officials say.
A relatively stable currency system is good for trade and investment, and it reduces risks for the overall economy, Zhao said.
"The US should never forget the principle of 'live and let live'. Otherwise its unreasonable demands would only aggravate unbalanced economic development. The US should stop criticizing others over currency issues because its accusations are only out of consideration of their own interests," Zhao said.
He Maochun, director of the Center of Economy and Diplomacy at Tsinghua University, projected that a 5 percent appreciation of the yuan could squeeze out China's profits gained by exports and force a large number of exporting companies to close down.
"The global recovery will be slowed if the momentum of China, which has been leading the recovery, is hampered," He said.
British Foreign Secretary David Miliband Tuesday cautioned against pressure on China over the foreign ex-change issue, Chinese Central Television reported. Miliband made the comments to Wen during their meeting earlier Tuesday in Beijing, the CCTV report said.
In the meantime, a UN think-tank backed China's currency policy, saying that yuan exposure to the money markets would pose greater risks to the world economy.
"Expecting that China will leave its exchange rate to the mercy of totally unreliable markets and risk a Japan-like appreciation shock ignores the importance of its domestic and external stability for the region and for the globe," the UN Conference on Trade and Development said Tuesday.
UNCTAD noted that China has "done more than any other emerging economy to stimulate domestic demand" in ordr to mitigate the crisis.
Consequently, domestic consumption increased about 9 percent last year, UNCTAD said, citing salary increases in the two-digit range as the reason.
The US annual trade deficit with China fell to $226 billion in 2009, down from $268 billion a year earlier, reports suggested.
China cut $5.8 billion of its $894.8 billion US Treasury bond holdings in January, though it remained the top owner of US government debt, the Treasury Department said Monday.
"Politicizing the exchange rate issue wouldn't be helpful to the coordinated efforts tackling the economic crisis," ministry spokesman Yao Jian told reporters in Beijing.
The trade surplus is an outcome and phenomenon of globalization, Yao said, urging the United States to be an advocator of free trade rather than obstructer.
"The United States ... shouldn't ask others to raise their currency for the sake of its own export expansion. That would be an egotistical practice," Yao said.
The remarks came a day after a group of 130 bipartisan Congressmen dramatized the blame game by signing a letter to Treasury Secretary Timothy Geithner and Commerce Secretary Gary Locke, demanding the Obama administration identify Beijing as a currency manipulator in a report due next month.
The US Treasury has not labeled China as a state that manipulates its currency, the renminbi, since 1994.
"Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors… The devaluation of the RMB also exacerbates the al-ready severe U.S.-China trade deficit," says the letter posted on the website of Congressman Mike Michaud.
In a bid to push US President Barack Obama, who urged China Thursday to adopt a "market-oriented" exchange rate, the US legislators said in the letter that the cheap yuan undermines the competitiveness of US exports to China and also called the Treasury to engage China in negotiations and suggested it should file a formal complaint with the World Trade Organization.
China's major trading partners claimed the yuan was kept artificially low to boost exports. But Beijing, the world's biggest exporter, stood determined against mounting foreign pressure for currency appreciation.
Premier Wen Jiabao said Sunday that he did not believe the yuan was undervalued and Beijing will stick to a "stable yuan". But He acknowledged the willingness to push ahead reform of the yuan's exchange rate mechanism.
Zhao Xijun, deputy dean of the School of Finance at the Renmin University of China, said the exchange rate of the renminbi should be decided by the country's macroeconomic situation, international payment balance and the supply and demand of currencies in the market.
"The foreign exchange mechanism has become more and more flexible and marketized since a major reform took place in 2005," Zhao said.
China began its currency reform by unpegging the yuan from the US dollar in July 2005. The yuan since appreciated 21 percent against the US dollar, or 16 percent in real terms, officials say.
A relatively stable currency system is good for trade and investment, and it reduces risks for the overall economy, Zhao said.
"The US should never forget the principle of 'live and let live'. Otherwise its unreasonable demands would only aggravate unbalanced economic development. The US should stop criticizing others over currency issues because its accusations are only out of consideration of their own interests," Zhao said.
He Maochun, director of the Center of Economy and Diplomacy at Tsinghua University, projected that a 5 percent appreciation of the yuan could squeeze out China's profits gained by exports and force a large number of exporting companies to close down.
"The global recovery will be slowed if the momentum of China, which has been leading the recovery, is hampered," He said.
British Foreign Secretary David Miliband Tuesday cautioned against pressure on China over the foreign ex-change issue, Chinese Central Television reported. Miliband made the comments to Wen during their meeting earlier Tuesday in Beijing, the CCTV report said.
In the meantime, a UN think-tank backed China's currency policy, saying that yuan exposure to the money markets would pose greater risks to the world economy.
"Expecting that China will leave its exchange rate to the mercy of totally unreliable markets and risk a Japan-like appreciation shock ignores the importance of its domestic and external stability for the region and for the globe," the UN Conference on Trade and Development said Tuesday.
UNCTAD noted that China has "done more than any other emerging economy to stimulate domestic demand" in ordr to mitigate the crisis.
Consequently, domestic consumption increased about 9 percent last year, UNCTAD said, citing salary increases in the two-digit range as the reason.
The US annual trade deficit with China fell to $226 billion in 2009, down from $268 billion a year earlier, reports suggested.
China cut $5.8 billion of its $894.8 billion US Treasury bond holdings in January, though it remained the top owner of US government debt, the Treasury Department said Monday.
