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A wrong remedy by the US
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16:33, July 11, 2007

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Recently some US senators, in the wake of the presidential campaign, have made irresponsible remarks on the issues of Chinese currency revaluation and the trade imbalance between China and the US. Regrettably two US senators and Democratic candidates signed up to co-sponsor a "punish-China" bill in retaliation against countries which keep their currencies cheap in order to boost exports. Experts say anti-China legislation may just be a card played by those who desire to gain more votes rather than solve the problem.

The anti-China bill is not being well-received. An editorial in the New York Times on July 7th, said: "Still, the prescription is headed in the wrong direction. Forcing China to revalue the Yuan would likely lead to higher prices in goods and a rise in interest rates; whereas a stronger Yuan would lead to inflation in the United States." Another editorial on the New York Times also pointed out that "if China and the US were to start a trade war, both sides would lose, and victims would include ordinary US workers and batches of US exporters including Boeing."

The editorial noted that a major problem in the US is a savings rate that is too low. It is not China who has broken the US savings box, but the US government's decision to cut taxes for the rich and the Iraq war, that has led to the decline in the savings rate.

Morgan Stanley Chief Economist, Roach, also said that RMB revaluation can neither fill the gap in US savings, nor could it solve the US's problem of excessive imports caused by excessive consumption. However, Yuan appreciation is likely to pose an impact on the Chinese financial system.

As a matter of fact, China-US trade relations are not on a one-way street to benefit China only- the US is the larger beneficiary. Do those senators know that China has been the fastest growing export market for the United States, for six years in a row since 2001; and that trade between the two has increased by 190 percent year-on-year in the past six years, 4.5 times that of US export growth to the rest of the world? In 2006, China imported more than 60 billion US dollars worth of goods and billions of dollars of service commodities from the US. China is expected to become the third largest export market for the US at the end of this year, surpassing Japan.

Additionally, the total sales of US-funded enterprises in China stands at 85 billion US dollars; and 85 percent of the trade surplus between China and US comes from foreign-funded firms in China, with a majority of funds coming from US firms. Would the senators not notice that China is not deliberately pursuing a trade surplus with the US? China is making strenuous efforts and is using various means to re-address the imbalance. China has cut import duties, imposed extra export tariffs, and lifted tax rebates for some exports.

However, why do US senators not see the responsibility China has taken and the convincing statistics?

Chinese vice Premier Wu Yi pointed out, at the second round of the China-US Strategic Economic Dialogue, that both sides should further promote bilateral trade cooperation for their mutual benefit. Instead of pointing the finger at China, the US should have a closer look in the mirror. Politicizing China-U.S. trade relations will not fix the bilateral imbalance between the two countries. The US should discontinue trade protectionism and loosen controls on technology exports to China. China and the United States have entered a period of inextricable interdependence in economic and trade relations. Irresponsible bills will be harmful, and the remedy is incorrect.

By People's Daily Online



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