Op-Ed Contributors
Yuan caught in a US political tangle
By Zhang Zhouxiang (China Daily)
Updated: 2010-09-23 08:16
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Even two years after the global financial crisis broke out the world economy shows few signs of a real recovery. In fact, high unemployment rate, decline in economic growth and various other indices indicate the world economy, especially the economy of the United States, is yet to be back on track.
But instead of trying to put its house in order, the US is blaming China for its poor economic performance. On Monday, US President Barack Obama told a meeting organized by CNBC that China had not done enough to revaluate the yuan and that Washington would file complaints with the World Trade Organization against Beijing.
Earlier, despite opposition from within and abroad, the US Congress held two full-committee hearings on China's exchange rate policy to "consider what action Congress and the administration may need to take" and "its effect on the US and global economic recoveries and on US job creation".
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But does the Chinese currency really exert such a great influence on the US economy? Fan Gang, director of the National Economic Research Institute, said recently that a faster revaluation of the yuan would not solve US problems. "The yuan rose impressively against the US dollar between 2005 and 2008. But the US trade deficit rose, too The key problem is not the dollar's exchange rate against the yuan, but its relation with a host of Asian currencies."
Fan made the remarks at an economic forum of Chinese and US economists, which was held in Beijing recently to discuss the post-crisis global economic balance and Sino-US trade cooperation. And although economists of both countries said the yuan's exchange rate was only one of the topics to be discussed, it drew the most attention.
Some US experts have said the yuan issue should not take up so much energy. Barry Bosworth, former US presidential adviser, said the importance of the yuan's exchange rate has been exaggerated.
Laura D'Andrea Tyson, a member of Obama's Economic Recovery Board, told China Daily: A "gradual appreciation of exchange rate" was one option.
The yuan's exchange rate is an economic issue, but US politicians have transformed it into a political game. John Naisbitt, author of Megatrends, said on Tuesday that arguments over the Chinese currency are "90 percent political and 10 percent economic".
China has become a scapegoat for the domestic political problems of the US and the European Union, he said.
Some US congressmen are so desperate to see a faster revaluation of the yuan that they have almost forgotten why the issue was raised in the first place. Economists suggested revaluation of the yuan was one of the measures, just like tax reform and structural adjustments, which could boost the US economy. But US politicians have made the means an end in itself and, in the process, forgotten how to fix the economy.
The crisis was triggered by deep structural problems in the US economy. So, US politicians should try to solve those problems, and not put more pressure on China to fasten the pace of the yuan's revaluation, because that would hurt bilateral ties.
Tang Min, deputy secretary-general of China Development Research Foundation, said: "US Congress likes to discuss issues of other countries, but if it adopts any drastic measures (against the yuan), China would respond accordingly. And that would cast a shadow on bilateral economic ties at a time when the global economy has not yet recovered fully. We should not forget what trade protectionism did in the 1930s."
The US should realize that protectionism could only make economics a zero-sum game, which will leave every player licking his or her wounds.
Economic problems have their own rules, and politicizing them would not yield any solution. History is witness to what happens when a country tries to solve economic problems with political measures. The Japanese currency's value rose after the Plaza Accord in 1985. But that did not mean a corresponding increase in US exports. In fact, many economists say the revaluation of the yen was one of the factors that created an economic bubble in Japan.
It's time the US learned from history. Since it has been suffering from economic crisis for two years, it should cooperate with other nations to solve its national and international problems, and stop looking for scapegoats.
The author works with China Daily.
(China Daily 09/23/2010 page4)