"A stronger renminbi is no panacea for America's economic problems. The jobs are gone and they aren't coming back. U.S. companies no longer make many of China's top-selling exports - furniture, toys and sneakers. ... Instead of getting bogged down in disputes with China, Americans should use this time to build a more competitive export industry."
The time for soothing silence
is over. For a few months, the endless whining by U.S. officials that China
should at long last let the value of its currency float freely had died down. That
was in the spring of 2009, when the global economic crisis had struck with full
force. At the time, fears were circulating that everyone would retrench and a wave
of protectionism would drag the world into a deep recession. U.S. officials kept
quiet.
But now China's economy is again
going strong, while unemployment in the United States still
climbs, most recently up to 9.7 percent. So now the whining has begun again. According
to observers, Washington may soon formally accuse China of currency
manipulation - an accusation that could further strain an already tense relationship
between the Americans and Chinese.
Since July 2008, the renminbi
has been de-facto pegged to the dollar. And since that time, the Americans have
never tired of pleading with China to come around to their point of view. They
would be better advised to keep quiet. As long as Beijing feels like its being
pushed into a corner, it cannot be expected to give way. China pursues
its own interests and, as Central Bank Chief
Zhou Xiaochuan explained recently, views the country's exchange rate policy as a
“contribution to the stabilization of the global economy.”
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by WORLDMEETS.US
BEIJING IS AWARE OF THE BENEFITS
It's not as if the Chinese
aren't aware of the benefits of such a revaluation. A stronger and more
flexible renminbi would resolve a number of China's problems. Inflation, for example,
rose in February to its highest level in 16 months.
High food prices are a
potential bomb in a country where many still live in impoverished
circumstances. A stronger currency would give them more purchasing power. At
the same time, the profits of export firms would decline and excessive
investment would be reduced. The result of a yuan appreciation would be to strengthen China's domestic
demand - which is the stated goal of the
Chinese leadership. And, quite incidentally - China would earn the goodwill of
the Western world.
PART 2: NO SILVER BULLET
Politicians and economists in
Beijing are well aware of these benefits. The reason they continue to vehemently
oppose a revaluation is obvious: a stronger currency is no silver bullet. In
order to bring a sustained boost to domestic demand, China's social system must
be completely turned inside-out. Retirement and health care planning must provide enough
security so that rather than saving their money - Chinese spend it.
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by WORLDMEETS.US
John Authors of the Finanacial Times assesses the likelihood
of a revaluation of China's currency, the remnimbi, March 16.
Tax and business reform is
just as urgent, otherwise the enormous profits will continue to land in the hands
of a few. Until Beijing resolves these problems, it won't be willing
to turn off the spigot on their source of income - exports. Whether the Americans
like it or not, they'll have to wait until China believes the moment has come
to loosen its exchange rate.
Therefore, the Americans
should keep in mind that a stronger renminbi is no panacea for their own economic
problems. The jobs are gone and they aren't coming back. In any case, U.S.
companies no longer make many of China's top-selling exports - furniture, toys
and sneakers. If the value of the renmibi rises, it will be U.S. consumers that
have to pay the difference.
Instead of getting bogged down
in disputes with China, Americans should use this time to build a more competitive
export industry. After all, just this past weekend, U.S. desires were again denied
by Prime Minister Wen Jiabao. They will decide for themselves when to adjust
their exchange rate, he said.
