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Facing another US challenge

(China Daily)
Updated: 2011-01-19 07:59

Americans have been obsessed with the Chinese currency's exchange rate of late, saying that the yuan is undervalued. But US Secretary of Treasury Timothy Geithner recently accepted that the yuan had risen appreciably since 2010, says an article in Beijing Youth Daily. Excerpts:

Timothy Geithner admitted that the American economy's problem lies within instead of with the Chinese currency exchange rate. His statement indicates that though the yuan's exchange rate is still one of the hottest topics in Sino-US trade relations, it will no longer be the primary one.

The final declaration of the G20 at the Seoul Summit last year did not mention the yuan's exchange rate. But the US's second-round of quantitative easing (QEII) policy has invited wide criticism. The US has discovered that it has few allies on the exchange rate issue.

By increasing its holdings of the national debts of European Union (EU) countries to show China's firm support to the euro, Beijing has increased the possibility of having a multi-currency partnership between the euro and the yuan. That has made the US look for new choices.

But the relative invisibility of the exchange rate does not mean a thorough change in Sino-US trade competition and cooperation. The use of preferential financing for exports shows that Washington is shifting the battleground from the currency to the export market. The US has sent another signal that China will face American competition in exports. In the past, the main threat to China's foreign trade had been the exchange rate risk created by fluctuations in the US dollar, but now Beijing will also face the challenge of what used to be less competitive US products.  

(China Daily 01/19/2011 page9)