Chinese Vice Commerce Minister Zhong Shan, in Washington at a time of heightened US-China trade and political tensions, told business leaders that changing the exchange rate was not the way to fix a huge bilateral trade imbalance.
“Revaluing the renminbi is not a good recipe for solving problems,” he told the US Chamber of Commerce, according to a transcript made available by the US business group.
A growing number of US economists estimate China’s currency is undervalued by up to 40 percent. They say that gives China an unfair price advantage in international trade, takes jobs away from other countries and adds to global financial distortions.
The economists’ views on the currency have been taken up by US lawmakers, who are crafting legislation that would slap import duties on Chinese goods to offset the price advantage China enjoys from suppressing the value of its currency.
Sponsors of the bipartisan bill want President Obama’s administration to formally label China a currency manipulator in a semi-annual Treasury Department report due on April 15.
The Obama administration twice rejected that route in 2009, as his Republican predecessor George W Bush had done. Wary of straining US-China relations, Obama has instead pressed Beijing to move to a “more market-oriented exchange rate”.
“What seems undisputed … is that China has a persistent economic strategy, a policy, key to which is the pegging of its currency to the dollar at an undervalued rate,” said US House Ways and Means Committee Chairman Sander Levin, an influential Democratic Party lawmaker.
“There’s no easy answer to the problem. But the answer is not to deny the problem,” Levin said. “China’s currency policy and export-led growth policy are bad for the rest of the world as well” as the US, he said at the start of a hearing with experts on Chinese exchange rate policies.
But Zhong restated China’s rejection of outside pressure on the currency in his talk with business leaders.
“A dip in the value of dollar will undoubtedly bring great repercussions to the global financial system and the world economy. It is in nobody’s interest, China’s, the US’ or other countries’, to see big ups in the renminbi or big downs in the dollar,” he told the US Chamber of Commerce.
“The right way to reach trade balance between China and the US should be expanding exports from the US to China, rather than limiting China’s exports to the US,” added Zhong.
US exports to China hit about $70bn in 2009 – representing flat growth over 2008 that analysts attribute to the global economic slowdown.
But American business leaders are increasingly complaining they are hitting a protectionist wall in China as a result of government policies favouring domestic industries and that Beijing is increasing state involvement in the economy.
“Regrettably, China is moving in a direction that is inconsistent with international best practice in developing an innovative economy,” said Myron Brilliant, senior vice president of the US Chamber of Commerce.
Brilliant said business leaders who have long defended China from protectionist pressures in the US were being undermined by Beijing’s policies.
“The ongoing policy approaches by China are eroding the support of their long-standing advocates in the United States, diminishing the many good arguments we have used historically in support of this relationship,” he said.
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Zhong was also slated to visit the U.S. Treasury Department, Commerce Department and the Trade Representative’s office during his two days in Washington.