"Yuan exchange rate issue" only western countries' excuse for low competitiveness

14:30, March 09, 2010      

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Western economies including the U.S. and the EU have continuously criticized that yuan exchange rate was too low. U.S. President Barack Obama, currency speculator George Soros and Noble Prize winner Paul Krugman blamed China for "cheap" Renminbi yuan. Chinese experts pointed out that the western countries are seeking excuses for their low competitiveness.

Excuse for trade protectionism

"The U.S. has three aims in pushing yuan appreciation: to slow down China's growth rate, to make China depend more on the U.S. and the U.S. dollars and to pluck Renminbi yuan's position as a international currency," Xiang Songzuo, a research with Renmin University of China said.

Yu Yongding, an expert with Chinese Academy of Social Sciences (CASS) noted that the U.S. has only two options in boosting export. "One is the depreciation of the U.S. dollars, the other is trade protectionism."

The western economies let alone the depreciation of the U.S. dollar and the euro, but urged China to adjust yuan exchange rate. The apparent reason was to reduce China's trade surplus, but in fact, they wanted all the other countries to pay for the U.S.' huge trade and budget deficit.

"The U.S. itself benefit most from the depreciation of its currency, leaving other countries and the fragile global recovery the victims," said Shi Jianxun, professor of Tongji University.

A escape from crisis

Since late 2009, some westerners claimed that yuan exchange rate "triggered global imbalance, induced the global financial crisis, affected employment in the developed countries and threatened the interests of developing countries," adding pressure on Renminbi yuan.

Another popular opinion is the "theory of rebalance," stressing that countries that enjoyed huge trade surplus were the sources of the financial crisis, calling for yuan appreciation to "rebalance the global economy."

In fact, the academic community already has some unified opinions toward the crisis, for example, the over-innovation of the U.S. financial institutions.

It was impossible to open the door to the recovery of the U.S. through pressing China to raise yuan exchange rate, said Sun Lijian, an economist with Fudan University. "The U.S. government has confused with their aims and policies, and the whole world would be disturbed."

Yi Xianrong, a known expert form the CASS pointed out that the U.S. and other developed countries hoped that they can rebalance the world economic and escape from the crisis by the appreciation of yuan and expanding exports to China. "That was only their ideal on the textbook."

Minor influence on trade imbalance

Low yuan exchange rate "led to China's huge trade surplus." That was the western countries' third reason in pushing yuan appreciation.

However, the "reason" cannot stand up to close scrutiny. Zhao Qingming, a researcher with China Construction Bank stressed that imbalance of an economy's deposit and investment was the fundamental reason for trade surplus or deficit. Exchange rate has only minor influence.

"The U.S. government wishes to eliminate trade deficit and ease its high unemployment rate by pushing yuan appreciation. That was only its wishful thinking," said Yi.

China's economic recovery was still relevantly fragile. If the developed countries ignore China's contribution to the world economy and force China to raise yuan exchange rate, the western enterprises will suffer a lot in case Chinese economy dips, warned Guo Tianyong, director with Finance Research Center of China's Central University of Finance and Economics.

By People's Daily Online
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