Economists see possible turnaround in U.S.-China currency row (2)

16:58, April 06, 2010      

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The United States is reluctant to see such a result, as it would have more to lose than gain, Wang said.

Sun Mingchun, chief economist for the Chinese market at Nomura Securities, said the Obama administration would remain inclined to cooperate with China, while it was some congressmen who were pressurizing the government on domestic political reasons.

"The majority of Chinese exports are low-end products with high price sensitivity. So U.S. punitive tariffs based on the exchange rate issue might result in a huge drop of China's exports to the U.S. market."

"China would have no choice but to fight back," said Sun.

U.S. labelling China as "a currency manipulator" would simply lead to a scenario where both countries would suffer, he added.

An economist, with the International Monetary Fund (IMF), who refused to be named, also forecast China's tough response to hostile moves from the U.S. side over the exchange rate issue.

"That will be destructive to a global economic recovery," the economist said.

Wang of Beijing University said the two countries still need each other.

"Obama showed eagerness to cooperate with China upon taking office. Despite the many frictions between China and the United States since the beginning of this year, the need for strategic cooperation did not evaporate overnight," said Wang.

"Cooperation brings far more benefits than confrontation will."

He believed that the two countries should find a solution through various dialogue channels.

It is widely accepted by economists that the adjustment of China's currency exchange rate would be vital in restructuring China's development model. But any adjustment should be decided independently by China, with an eye on its own economic condition rather than as a result of outside pressure.

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