US

Expert: US' row over yuan a false issue

By Zhong Nan (China Daily)
Updated: 2010-11-09 10:54

BEIJING - A former US official has declared that the cause of the huge trade imbalance between China and the United States is not the value of the yuan.

Albert Keidel, who was the former deputy director for the office of East Asian Nations at the US Department of Treasury between 2001 and 2004, said the yuan issue has been driven by a group of US politicians. "The yuan is a false issue, and I believe most US policymakers know this."

Keidel told China Daily the yuan issue has been a long-term economic discord between the two countries as the US has complained an "undervalued" yuan caused Washington's trade deficit with Beijing. He said the yuan issue has been driven by a group of US politicians." The yuan is a false issue, and I believe most US policymakers know this."

Late September, the House of Represenative overwhelmingly passed the Currency Reform for Fair Trade Act, which authorized the Commerce Department to ipose tariffs on imports from trade partners with "undervalued" currencies. This bill now awaits a Senate vot and presidential approval.

But US businesses in China are responding differently to the bill.

"Blaming China won't help the US economy but this legislation may cost American jobs," said John Watkins Jr, chairman of the American Chamber of Commerce in China, which represents 1,200 companies.

"We call on the US Senate to thoroughly review the proposed legislation and we hope it does not move forward in the legislative process."

Zheng Xinli, deputy director of the Committee for Economic Affairs of the Chinese People's Political Consultative Conference, said: "More than 60 percent of Chinese exports are produced by foreign-invested companies in China, many of them American companies, which ship their products back to the US for sale."

"Imposing the tax will harm their own companies."

He said that although the yuan's value will be mentioned at the G20 Seoul Summit this week, low unemployment rate, the slow economic recovery and strong internal opposition will push the Obama administration to take a prudent attitude to discuss the currency.

"After all, the Americans are still expecting China to share their difficulties, such as buying US debts, and they know it isn't a correct time to launch an unprepared trade war with China," Zheng said.

In September, bilateral trade between China and the US stood at $35.96 billion, with China enjoying a trade surplus of $18 billion. The surplus was a slight drop from the previous month.

Keidel said complaints about the yuan exchange rate seem to be driven by superficial political needs in the US.

"US politicians may talk like they will be tough, but they don't want to disturb the relationship and won't do anything to hurt China seriously," he said.

During the US midterm election, high unemployment rate caused many US politicians and candidates to increase efforts to blame China and its currency policies. They also tried to shift domestic problems to the unbalanced Sino-US trade and Chinese enterprises.

"But they have to make charges against China, especially during an election, to avoid having an opponent making accusation of being too 'soft' on China," Keidel said.

China Daily