New Sino-American tensions over yuan and trade
Beijing (AsiaNews/Agencies) – China has criticised US President Barack Obama who yesterday said he would get tough with Chinese protectionism and currency policy, which has artificially propped up its currency, the yuan, to levels far below its real value. According to the US leader, Beijing’s policies have created an uneven playing field for US companies.
Chinese foreign ministry spokesman Ma Zhaoxu was quick to respond, saying, “The level of the yuan is close to reasonable and balanced,” adding that “Accusations and pressure do not help to solve the problem”.
When, at a meeting with Senate Democrats, Mr Obama was asked about trade relations with China, he answered saying, “The approach that we're taking is to try to get much tougher about the enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways.”
Moreover, “One of the challenges that we've got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price," he said.
For quite some time, the artificially low value of the yuan has been an international issue. Many countries and companies have criticised China for keeping the yuan too low, to favour its exports. Additionally, government subsidies have allowed Chinese companies to invade the world market.
For some analysts, the yuan is undervalued by about 30 per cent against world currencies, and about 40 per cent against the US dollar (see Maurizio d’Orlando, “G8, toxic securities, US and Chinese addictions,” in asianews.it, 7 July 2009)
For his part, Ma Zhaoxu urged the United States to look at matter objectively and with a clear head.
Tensions over the yuan and trade have been compounded by recent US accusations over the internet (censorship of google) and Chinese protests over Tibet and a scheduled visit by the Dalai Lama to the White House as well as the sale of US weapons to Taiwan.
However, for some analysts, Obama’s position seems more like posturing for domestic consumption at a time when his policies appear to be at a stalemate a year into his mandate.
China is aware of this and its response has been in line with its established practice.
For Beijing, Washington’s fiscal practices rather than the Taiwan arms sale or the Dalai Lama’s visit to Washington are the real issue because they threaten to undermine the value of China's vast dollar holdings.
The Obama administration on Monday proposed a budget of US$ 3.83 trillion for fiscal year 2011 with a forecast deficit of 1.56 trillion U.S. dollars in 2010.
For Chinese experts, such a huge deficit can only be covered by printing more money, and flooding the economy with cash, which will prompt further declines in the value of the dollar.
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09/10/2007
