China has warned that the bill over its alleged currency manipulation, which has just passed the US Senate, risks triggering a trade war between the two nations.
‘Should the proposed legislation be made into law, the result would be a trade war and that would be a lose-lose situation for both sides,’ said Vice Foreign Minister Cui Tiankai of a bill that supporters say would force China to revalue the Yuan and so help bring jobs back to the United States. ‘It would be detrimental to the development of economic ties and might have an adverse impact on bilateral relations.’
The Senate voted 63-35 to introduce new duties on imports from countries whose currencies are considered by the US to be undervalued. However, the bill has clearly been drafted very much with the Yuan in mind, which analysts believe could be as much as 30 percent undervalued, thus making Chinese goods cheaper for export.
‘The passing of the act, under the pretext of so-called “currency imbalance,” is a protectionist measure in nature, which severely violates the WTO rules,’ CNN quoted Chinese Foreign Ministry spokesperson Ma Zhaoxu as saying. ‘Not only will it fail to solve the economic and employment problems in the US, but it will severely obstruct China-US economic relations and trade.’
The Chinese position today also received what some might see as surprising support from the Republican Party leadership in the House of Representatives, with House Speaker John Boehner also warning today that the Currency Exchange Rate Oversight Reform Act creates a severe risk of a trade war.
‘Given the volatility in the world markets, given the uncertainty in the world economy, for the Congress of the United States to be taking this step at this moment in time poses a very severe risk of a trade war and unintended consequences that could come as a result,’ he said.
His comments came as Reuters reported China has launched an unprecedented lobbying effort that includes paying a Washington law firm $35,000 a week to lobby Congress and explain congressional politics to Chinese decision makers.
Still, according to China analyst Minxin Pei, the proposed sanctions in the bill won’t bite anyway. ‘(There are) increased dumping duties, which China is already paying, a ban on federal procurement in the US, but China doesn’t bid for those contracts anyway, and ineligibility to receive financing form the Overseas Private Investment Corporation. But China rarely benefits from this insurance,’ Pei told me.
Indeed, Pei believes that the legislation, rather than pressuring the Chinese to devalue their currency, could have the opposite effect by forcing China to suspend devaluation.
‘The US Congress is at its bottom level, not just in the United States, but also around the world, ‘he said. ‘In Beijing, Congressional chest-thumping simply makes all Chinese angry and even more resistant.’
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Leonard R.
1. There already is a trade war, but only China is fighting it.
2. This is a win-win for the bill’s proponents.
A. If it passes, it’s an opportunity for the PRC to lash out and behave badly,
thus alienating what few (if any), defenders China has left in America.
B. If it fails, it allows anger in America to continue to grow deeper and wider.
C. It allows the PRC to continue to behave badly, thus alienating more Americans.
Finally, that law firm China has retained in Washington, is assisting a foreign power
with whom the United States is at war. That’s my opinion. They are traitors to the United States.
All-in-all, this is a good development.
Hững hờ
Agree, we all would like to see how PRC could react and punish US, for threatening and objection are always strong, but actions need a lot of consideration before punishments can be released.
Watcher
I believe even red blooded americans have to be honest enough to admit that the real reason for their deficit is that they are spending more than they are making. Is it reasonable to blame the shop for selling things cheap when we go broke from too much purchase? Huge tax reduction and starting two expensive wars – you don’t have to be a rocket scientist to see that this doesnt add up.
Sure the Chinese are currency manipulators and they should stop, but that is not the main problem. This should cause more problems for other countries that are competing for cheap products on the world market.
HHop
The trade war has already begun. I stopped buying anything Chinese-made to the best of my ability. No more making the Chinese leaders (not the general Chinese population) rich and get unsafe product and poisonous food in return.
Simon
Huawei, China’s giant telecom company has been identified as linking to China’s Ministry of Spy and got excluded from building any wireless 4th generation network in the US. Searching for keywords: huawei us government.
We have already stopped buying any products from China.
a_canadian_observer
This is welcome news. I hope the Canadian government is doing the same.
The people I know and I have stopped buying chinese-made goods, to our best, for a long time.
John Chan
@a_canadian_observer,
You also need to stop buying products “Imported by” Canadian companies too, although those products do not labelled “Made in China” but they most likely are made in China.
Only finally assembled in USA or Canada, products can be labelled “Made in USA” or “Made in Canada”, so you should not buy products “Made in USA” or “Made in Canada”, because majority components of those products are made in China, of course this is a WTO rule, so you should not buy anything that is not labelled “Made in China.”
Any products that appears good value, i.e. good quality and low price, you should not buy too, because they are most likely made in China as well.
Min Yi
Agreed on stop buying anything made in China. Intially, US, Japan and other countries wanted to help and supporting China to develop and peacefully integrated into the World community. The last over 10 years china was developed reasonly fast due to this supports. As China grows, now it forgot who has helped it to get to where it is today and begins to show its thugs behaviours in Asia. I am almost sure the same hands helped and supported China can bring it down. It is a good thing China has shown its real face early enough for the World to prevent another Nazi, Facist or Communist nation to rise. It’s not too late… Thanks God, it’s still quite early.
Anon
I agree with those who say China began the trade war when it began its policy of devaluing its currency.
It is foolish to tell a leech not to suck blood, and it is foolish to continue to bare our neck to Chinese protectionism.
jim1980
US is biggest currency manipulator in the world by passing QE1 and QE2. Just look at the gold vs US dollar ratio. All those “Arab Spring evolution” can contribute some degree to US selfish economic policy. Everybody should boycott US goods.
Watcher
QE1 & QE2 is peanuts compared to the Chinese currency manipulation so if you are Chinese I would not complain – you have no arguments! Arab Spring came about as people want more freedom and the right to speak their mind. Why do you think the Chinese authorities increased the budget on internal security by 13%(making it larger than selv defense) this year? Clearly they are more worried about the chinese people than all other foreign forcer combined. Speaks volumes!!
JUSTSAYNO
“Arab Spring came about as people want more freedom and the right to speak their mind. ”
The main cause of the Arab Spring was inequality. The poor could not find jobs to feed their families so they revolt. The trigger of the Arab Spring, the Tunisian fruit vendor who killed himself, happened not because he doesn’t have “freedom to speak his mind” but because the Tunisian police took away his only means of making a living.
Watcher
I agree that inequality was an important contributing factor and economic hardships was the trigger, but you only have to listen to the demands of the protesters to know that they demand freedom and democracy. Not orchestrated from western countries, but by their own will and lack of fear. I sure hope they succeed!
a_canadian_observer
@jim1980: Wisemen speak because they have something to say; fools, because they have to say something.
- Plato
John Chan
I wonder why someone never looks into the mirror himself.
a_canadian_observer
@John Chan: Why don’t you do a poll?
jim1980
QE1 & QE2 is peanut. Yes, go research how much gold appreciate vs Dollar in the past three years. It went up 117%. Yes, inflation in the US is very little since US is food producer country, but for other countries, it went 20 to 30%.
You clearly don’t have any idea what you are talking about or live in your own isolated world.
Arab Spring wants freedom, if that’s what you believe. They all want to overthrow Israel and become more fundamental Muslim country. If you think that’s freedom, you are very naivete. They want more food. Since US dollar is reserve currency, its QE1 and QE2 has disaster effect on world commodity market. Egypt riot because they don’t have bread to eat since Egypt has to import wheat.
Watcher
I think you have been censured too long. Have you seen the demonstrators and heard their demands? China has manipulated currency for a very long time and you are complaining about QE? Other countries may have a reason to complain, but not China. Actually many other countries also have conplaints about the Yuan (QE as well). At least if you criticize QE you should admit that Cina is also at fault regarding their currency manipulation. Be honest!
JUSTSAYNO
You have to laugh at the Americans who are complaining about China’s currency manipulation. Can anyone give a good reason why should the Chinese government should not do this? Afterall, the purpose of the Chinese government is to provide better lives to Chinese people, not to Americans. Japan, Korea, Taiwan, all became wealthy because they engaged in exactly the type of currency manipulation China is doing today. Japan entered its decade long recession mostly because it signed onto the Plaza Accord at the insistence of Americans which allowed its Yen to float. Why should China repeat Japan’s mistake?
Davis
Then The US should take care of its own people, too!More trade protectionsim, more tariffs on chinese goods until China revalues its yuan, opens its markets for American exports, stops intellectual thefts, stops favoring Chinese local companies over the American ones operating in china, etc. I guess the country got hurt the most here is.. china not the US! China will be collapsing instantly! The new elected US president, either Republican or Democrat will surely have to place the American interests first, not the greedy American corporate’s in China & of course not of China!!
John Chan
@Davis,
It is about time for the US government to take care of its citizens, instead of those greedy Wall St. vulture bankers.
Trillions of QEs let banks borrow at zero interest, instead lending to the Americans, bnaks use those free money to buy 4% interest treasury notes. Meanwhile the Fed and the government are ignoring the plight of tens of millions of unemployed Americans.
Instead of taking actions to provide jobs for the unemployed, the US Congress engineered a smoke screen “China currency manipulation” to divert attention. What the hell is it? You called USA a country cares about its people, democracy, and human rights? It seems the Congress is a house full of morons.
Bart
Once again the politicians are imposing a one dimensional solution to a multi dimensional problem. The article and the people commenting failed to make a important link. That is that the so called currency manipulation of China is also what is supporting the US dollar. While the treasury is trying it’s best to keep China supporting the US dollar by continueing to buy US T bills and other assets you have the congress accusing China of currency manipulation for that very practice. If China where to stop ‘manipulating’ it’s currrency ie stop purchasing US paper assets then the dollar would fall and interest rates in the US would have to rise for the 15 trillion dollars of national debt but also for a lot of the common people as well who have large sums of personal debt from mortgages, car loans, student loans and creditcard debt. Unless the FED prints more money to off set the Chinese selling of US assets which in turn will create more inflation in America and around the world. People are also ignoring the biggest currency manipulation scam in history aside from the QE programs, that is the US dollar as the world reserve currency. Which has being bad for the world and the Americans as well. It has for year’s if not decades keeped US interest rate artificially low and the value of it’s currency artificially high making the country and people believe that there are richer than they actually are and both the government and it’s people where living beyond there means. Which is what in large part has caused the problems for the US economy and the rest of the world. It’s also forces the rest of the world to hort large amount of US dollars to pay for imports. There are now more US dollar circulating outside of the US then inside and when those dollars are beginning to return to the US somewhere in the future it will be the monetary equivilants of a hydrogen bomb exploding in you’re face at close range. The American jobs will not return to the US or the jobs there are now won’t stay unless there are fundamental changes in the monetary, industrial, social and fiscal policies in the US. Even if China raises the value of it’s currency tomorrow by 40% it would make no difference for the US’s job picture. And if the US has such a compelling case for Chinese cheating then why not take it up at the WTO rather than take unilateral actions that are clearly illegal under WTO laws creating a potential for a trade war that would hurt every one. I personally believe that China should raise the value of it’s currency not to appease the Americans but rather for her own interest. As a higher currency would help them to fight the inflation problem domestically as it will stop them from printing money to buy US dollars. and the US export market is not going to last anyway because the US economy is in a mess and will contenue to get worse.
Davis
China needs not only appreciate its currency but also OPEN ITS MARKET for American exports, RESPECT intellectual property rights etc. and stop its predatory mechantilist economic policy! We need a level playing field not this sort of beggar-thy-neighbor! China buys US T-bonds to ’support’ US economy? It’s just a ‘myth’, childish & naive! China bought T-bonds only to hold down its yuan for its own export advantages!That’s it! This practice is not any help for the US’s economy but, on the contrary,very harmful to it! Over 15 million Americans currently unemployed together with the gigantic trade deficit for the US! Is it not enough for a new economic approach towards China’s mercantilism? Hope the new leadership in WH will answer this question!
http://www.washingtonpost.com/opinions/romney-china-must-respect-the-free-trade-system/2011/10/13/gIQAiffViL_story.html
Bart
It’s a fact that the purchase by China and other countries of US paper assets are helping to keep interest rates low and the value of the US dollar high. Which has a nefast effects on both the US and world economies. This is largely the results of the status of the US dollar as the worlds reserve currency. By blaming other countries and not look at the problems of the US policies internally will only mean that the US are going to take actions that would further hurt it’s own economy and those of others. The US has one of the world’s most inbalanced economies with 71% made up of consumption and about 12% production and the rest is just people flipping hamburgers, pouring coffee and institutions like Bank of America and Goldman Sachs bouncing empty boxes off of each other. This is the result of the fact that ultra low interest rates that gives no returns on savings and encourages speculation. People simplely doesn’t have to work anymore to make money. The speculators are taking away that capital/savings that genuine entrepreneurs need to invest and grow their business. That coupled with the high taxes and stringent regulations are pushing business people to seek oppurtunities abroad. China which has one of the world’s highest savings rate are able to invest in education, infrastructure, science and industry. While the US has being borrowing money to consume foreign made goods and spend money on military expantion and foreign wars. How much are the US selling to Europe the rest of Asia or Latin America ? The US has a structural trade deficit with something like 130 out of about 170 countries it trade with. I think the US should start looking for the problems inside it’s own borders rather then blaming others.
Lung Sha Shou
We are so used to hearing the Chinese bleat on about other countries “interfering in their internal affairs” that we sometimes forget they generally behave with breathtaking arrogance and hypocrisy. What the representatives of the American people decide is not for the dictators of an authoritarian country to comment on,
After all their political power, in the words of the 20th Century’s greatest terminator of human life,”comes from the barrel of a gun”. Given that their goals, in the words of Chi Haotian, in respect of the civilized world are to be, “like a fist smashing outward” this sort of contemptible drivel should be seen for what it is. Self interested threatening rhetoric.
Re-arm.
Huang
From the surface, the US congress is just playing politics as the election season approaches. After all, playing politics has become a pre-requisite of US politicians at all levels. Politicking is all about mainstreams or the predominant sentiments of the time and all successful politicians in the US met or exceed these requirements.
Unfortunately, playing politics in the middle of an economic crisis is not only bad timing,it is morally wrong and unfair to the people who voted these politicians into office in the first place. Consequently, while politicians’ main concerns are to secure their electabilities ,the urgent tasks at hand are often neglected and the cycle continues.
The dis-satisfactions or negative perceptions toward China’s imports to the US have been on the rise but NOT to the point of a total boycott of Chinese imported goods is demonstrating the rationality of US consumers over sentimental inclinations not to buy products that are made in China. In fact, for every dollar’s worth of goods sold in US,60 cents went directly to the US economy while onlt 40 cents is sent back to China. In essence, the Chinese imports are making an in-direct yet substantial contribution to the over-all economic environment of the US in terms of transports,distributions,marketing premises,and employments for the sales staffs of many business establishments.
On the currency topic, efforts to pressure the value of the RMB to rise is based on sentimental and political considerations, not sound economic wisdoms. Raising the value of the Chinese Yuan would not guarantee any substantial job creations in the US while seriuosly disrupting the normal and sound economic co-operations and international relations that benifit NONE.
As a matter of fact, this financial or trade quick-fix has already been applied to Japan in the 1990s and the result of that un-sound economic flaw is still being felt or suffered by Japan till this day. The Japanese lesson was studied by most Chinese economists since that time. Of course, some scholars and politicians even boasted in public about how much the US national debts will be reduced by the raising of the RMB-is this the right thing to do or it is just one selfish way at solving ones own problem? The answers or responses will varied depending on the individual.
On the trade issues, the present trade im-balances between China and the US is unfortunately influenced by politics and strategic considerations. China exports every kinds of products to the US while the US imposes many trade restrictions and export controls on products to China. One does not have to be a great economist to understand the abnormal nature of trading relationship. In fact, the US can easily turn a trade deficit into a trade surplus against China by merely lifting all that obsolete export restrictions. China wants to buy and the US refuse to sell is the case at this point.
Fianlly, job creations bills proposed by the president of the US is AGAIN being highjacked by politiking as we speak. Politicians are still putting politics before economics and the people.
P.S. The US is more can capable of doing whats urgently needed economically. It is the absence of the will to do what is right and economically sound that hold the US in limbo. Blaming China on the lost of jobs and other financial woes is the wrong step to take in solving the economic difficulties of the US.
SCdad07
China Eastern cancels order for 24 Dreamliner 787’s – 17 Oct
Pegging RMB to US$:
US secretary of the treasury of past and current all vowed to defend strong US dollar policy (Geithner 26 Apr 2009: vowed Tuesday that the United States would never follow a strategy to weaken the US dollar).
RMB is overvalued to other world currencies per all US secretary of treasury.
Unless, as any JOE in US yelled, you lied.