China to World: Yuan a Rumble?
by Paul Springer
As China’s president prepares to visit the U.S. and talks a good game about international cooperation, another message emanating from China is not so comforting.
China has been under fire since it decided last year to not allow its currency to float freely. President Hu Jintao has been said to dismiss criticism of his nation’s yuan policies in his recently publicized responses (see page 3) to questions from The Washington Post and The Wall Street Journal.
But really his lengthy response dances all around the question of China’s plan for the yuan, although he did say, “The current international currency system is the product of the past.”
The more direct statement came over the weekend from other parties such as He Keng, the deputy director of the financial and economic-affairs committee of the National People’s Congress, according to Dow Jones:
“China should keep the yuan stable, and the yuan shouldn’t appreciate,” He Keng, deputy director of the financial and economic-affairs committee of the National People’s Congress, told a forum in Beijing.
He also said it isn’t bad for a country to hold a large amount of foreign-exchange reserves.
His comments are in stark contrast to the universal opinion held by economists and U.S. politicians that a fast rise in the yuan will help China to curb the country’s burgeoning inflation.
So who in China really calls the shots when it comes to explaining China’s currency? It’s not necessarily Hu. The New York Times advances the argument that Hu has internal problems of his own that weaken his regime and make it difficult for him to respond to U.S. concerns over issues like currency, human rights violations, and copying of other nations’ technology:
American officials… have felt at times that Mr. Hu agreed to address their concerns. But those problems have festered, and after first wondering if the Chinese leader was simply deflecting them or deceiving them, President [Barack] Obama’s top advisers have concluded that Mr. Hu is often at the mercy of a diffuse ruling party in which generals, ministers and big corporate interests have more clout, and less deference, than they did in the days of Mao or Deng Xiaoping.
As the economies of China and the U.S. become more intertwined, it’s disturbing that we can’t get straight answers on China’s economic policies. At this point, it appears, we really don’t know who to ask.
And according to a Reuters report on another Chinese official’s comments on yuan plicies, President Obama probably won’t even raise the subject of currency manipulation in the upcoming meetings with Hu.
Sounds like another International Monetary Fund hot-air fest.
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