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Yuan revaluation won't help US trade deficit
(Xinhua)
Updated: 2005-04-11 14:54
No matter whether China revalues it currency or not, the United States trade deficit will remain unaffected, said Chinese financial experts.
The US Senate passed a bill Wednesday, saying it would slap a 27.5 percent tariff on Chinese imports if China does not revalue its currency within 180 days.
A clerk at the Hai'an sub-branch of China Construction Bank in Jiangsu counts the renminbi notes in this March 2005 file photo. The US has been pressing hard for a renminbi revaluation, but experts and economists say there is no hurry for the exchange rate adjustment and yuan revaluation will not help the US to cut its trade deficit. [newsphoto] |
"This is an old trick of the United States to make currency politicized," said Li Yang, head of Institute of Finance of Chinese Academy of Social Sciences.
In the 1980s the United States also criticized Japan on currency matters.
Li said, "What the United States has done is to claim that because China has gained great profits from controlling its exchange rate, it should be responsible for trade deficit of the United States."
"However, whether China revalues its currency or not will not be helpful for the United States to solve its financial and trade deficit problems. This is because the deficit is rooted in the structure of the United States, that is, the imbalance between savings and investment."
Thursday, Qin Gang, spokesman of the Chinese Foreign Ministry, in response to the new bill, said, "If one country's fiscal deficit could not be made up by its own private savings, it has to go to foreign exchange inflows, which usually causes deficit problem in current account."
"The United States should look more into domestic means to restore its economic balance."
Yi Xianrong, a colleague of Li, said the pay that Chinese workers get are much less than what the US workers get. So even if the RMB is revalued by 50 percent or 100 percent, it cannot change the fact that the cost of Chinese labor is much lower.
Yi said China's surplus in Sino-US trade does not indicate that all benefits go to China. The US people can buy inexpensive and good products from China and the profits for Chinese exporters are lesser than for US importers. At the same time, China has bought large amount of treasury bonds from the United States.
"So we can say that the United States has shared the fruits of China's economic development," Yi said.
A report from the International Monetary Fund said that the RMB, China's currency, has not been undervalued. The US Treasury Department released a report last December, saying that the Chinese government does not trade unfairly with the United States by controlling the RMB exchange rate.
Yi said the RMB exchange rate cannot be adjusted rashly since we cannot find an appropriate point to relate it to the US dollar. What's more, in current circumstances, adjusting may bring risks.
Guo Shuqing, former director of the State Administration of Foreign Exchange, said the yuan fluctuates simultaneously with the US dollar. Within the same range it is basically stable against the dollar.
"Following the Asian financial crisis in 1997, currencies in most of China's neighboring countries depreciated, but a strong dollar has pushed higher the renminbi exchange rate on average from 1997 to 2002. Only after 2002 did the dollar start to weaken -- together with the yuan," Guo said.
Li Yang said China has made "remarkable efforts" to improve the Chinese exchange rate system and that a judgment on whether the currency has been undervalued should be made from the perspective of the country's position in the world economy.
On March 14, Chinese Premier Wen Jiabao said China is working on a plan for a more flexible exchange rate for its currency, but the specific measures might come around unexpectedly.
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