China accuses U.S. of politicizing yuan as trade surplus sinks

Pressure on China to strengthen the yuan does “no good to anyone,” China's Commerce Minister Chen Deming said at the China Development Forum in Beijing today. China's trade balance likely slipped into the red in March, although the yuan was stable, showing that exchange rate changes have a “limited” impact on trade, Chen said.

Tensions over China's currency are mounting, with President Barack Obama facing increased calls from American lawmakers to step up pressure on China for keeping its exchange rate artificially low. Chen today warned that sanctions against China that amounted to protectionism would hinder growth and raise the risk of a “double dip recession.”

“No matter how tough both sides sound now, they'll eventually come back to the negotiation table for a mutually beneficial solution,” as any U.S. sanctions will be detrimental to both, Li Wei, an economist with Standard Chartered in Shanghai, said in a telephone interview.

Li said he expects the yuan to rise by 2 percent this year, a pace that won't harm the economy.

Five senators, including Charles Schumer of New York and Lindsey Graham of South Carolina, last week introduced legislation to make it easier for the U.S. to declare currency misalignments and take corrective action. The Treasury Department is to decide next month whether to label China as a currency manipulator.

'Blind Eye'

China “won't turn a blind eye” if the Treasury Department's April 15 report labels the Asian nation as a currency manipulator and sanctions follow, Chen said in comments broadcast on China Central Television. The government will “deal with” any escalation of the dispute, he said.

China's leaders have repeatedly said that their yuan policy isn't the cause of the U.S. trade gap.

“We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency,” Premier Wen Jiabao said on March 14.

The government has kept the yuan at 6.83 per dollar since mid-2008 to shield exporters from the global recession and a contraction in world trade. It allowed the currency to appreciate 21 percent in the three years before that.

The yuan “actually isn't particularly undervalued anymore,” Goldman Sachs Group Inc. Chief Economist Jim O'Neill said last week. “It's unfortunate that we have so much political angst around this. The key thing is that post-crisis, China is importing a lot.”

1|2|Next Page>>

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email