China today disputed Barack Obama’s suggestion that it was artificially depressing its currency to gain a trade advantage.The US president promised to take a tough line with Beijing over its currency and implied it was breaking trade rules in the latest in a series of rows straining US-Chinese relations.
His remarks were dismissed by the Chinese foreign ministry spokesman, Ma Zhaoxu, who said the yuan was correctly priced.”At the moment, looking at international balance of payments and forex market supply and demand, the level of the yuan is close to reasonable and balanced,” he told a press conference.
“Criticism and pressing obviously is not helpful to solving problems.” The comments come at a tense time in relations between the countries, with diplomatic concerns over issues including US arms sales to Taiwan, Obama’s possible meeting with the Dalai Lama and China’s alleged cyberattack on Google. Washington and other Chinese trading partners claim the yuan is kept undervalued, giving Chinese exporters an unfair price advantage and swelling China’s trade surplus.
Obama addressed those concerns at a meeting with US senators yesterday, saying: “The approach that we’re taking is to try to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries. “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. That puts us at a huge competitive disadvantage.”
However, Ma said the exchange rate of the yuan was the main reason for the US trade deficit with China. “We hope the US side could objectively and rationally see a number of problems in the Chinese-US economic and trade co-operation and appropriately deal with them via negotiation,” he added.
China reported a $196bn (£106bn) global trade surplus last year. The Peterson Institute for International Economics in Washington has estimated that the yuan is undervalued by about 30 percent against all world currencies and about 40 percent against the dollar. Underscoring U.S. concerns, Republican Senator Charles Grassley urged Obama to formally designate China as a currency manipulator to prod Beijing into action.
Obama has twice declined to label China as a currency manipulator, but faces a third decision on that issue in April. Finance ministers and central bank governors of the Group of Seven rich nations will discuss China’s currency this weekend in Canada, a U.S. Treasury official said.
Zuo Chuanchang, a researcher with the Academy of Macroeconomic Research, a think-tank under the National Development and Reform Commission, said a row over the yuan would not lead to anything like a trade war.”It’s very normal to see some disputes between China and the United States, but this doesn’t mean there will be a bust-up.” he said. “It’s a political show, and it does really mean too much.”
