US pressure on yuan ‘distracting from cooperation’

As the US trumpets its impatience over the value of the yuan mere days ahead of Chinese President Hu Jintao’s visit to Washington, officials and experts in Beijing warned that forcing the issue would be counterproductive and would erode efforts to find common ground across a broad spectrum of issues.

The exchange rate of the yuan against the US dollar hit 6.612 Wednesday, its highest since June, according to the China Foreign Exchange Trade Center.

China pledged to take tangible steps toward promoting market-oriented interest rate reform, resulting in 3 percent rise in the yuan against the dollar since June.

Despite this, the US’ calls have become ever more strident, calling for a “real demonstrative commitment” from China and urging it to raise the yuan’s value more rapidly to cool its exports, resulting hopefully in a narrowing of Washington’s trade surplus and creating more jobs in the US.

US Treasury Secretary Timothy Geithner called for rebalancing economic relations with Beijing Wednesday, saying that China is “too large” to have an export-based growth, AFP reported. Zhang Yesui, the Chinese ambassador to the US, said Wednesday that the appreciation of the yuan would neither eliminate the US trade deficit, nor tackle its high unemployment rate.

“The trade imbalance between China and the US has primarily resulted from the structural difference between the two countries’ trade and investment, and is an outcome of industrial division and transfer against the background of globalization,” Zhang told the Global Times.

Yao Yang, director of the China Center for Economic Research (CCER) at Peking University, said any impact the appreciation of the yuan might be minimal and that attempts to pin quick-fixes for US economic problems on the yuan were ineffective.

Should the yuan appreciate by 5 percent against the dollar, the US employment rate would rise microscopically by only 0.03 percent and a 20 percent rise would only result in a 0.16 percent employment hike, according to a CCER model co-developed with a US institution. Shi Yinghong, director of the Center of US Studies at the Renmin University of China, told the Global Times that the US believes incorrectly that China will be more likely to bow to pressure in order to ensure a successful state visit by its leaders.

“The foreign exchange mechanism will allow the yuan to float to a level enabling China’s economy to absorb the impact of the appreciation. External pressure on the issue will produce little result and may risk hindering future cooperation between the two countries in other fields,” he said.

China’s global trade surplus fell to $183.1 billion in 2010, the secondstraight fall, according to the General Administration of Customs, as China endeavors to boost its domestic demand and reduce exports.

Tao Wenzhao, a researcher at the Institute of American Studies at the Chinese Academy of Social Sciences, speculated that China may deal with US businesses in terms of buying aircraft and agricultural products as well as signing agreement in other important fields such as energy.

“China needs to make these procurements to develop its own economy. At the same time, the trade imbalance between China and US does exist and China is doing its best to narrow the gap by purchasing more from the US,” Tao said.

“Instead of quibbling over a point or two in the exchange rate, it makes more sense for the US to loosen export restrictions, especially high-tech export restrictions on China, to balance the bilateral trade, which would bring more benefits to both countries,” he added.

Song Shengxia, Huang Jingjing and Xinhua contributed to this story

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