|(A modest appreciation of the yuan is probably not far off)
Chinese Leader Firmly Defends Currency and Trade Policies
By MICHAEL WINES
New York Times
March 14, 2010
BEIJING — Premier Wen Jiabao sharply defended China’s currency and trade policies on Sunday against what he called foreign “finger-pointing,” charging instead that the developed world seeks to force unfair changes in those policies “just for the purposes of increasing their own exports.”
Mr. Wen’s remarks, which echoed a rebuke on Thursday by one of China’s central bankers, were perhaps the sharpest yet in a brewing disagreement between Beijing and Washington over the two nations’ economic positions.
In a more than two hour news conference at the close of China’s annual legislative session, Mr. Wen repeated that China will keep its currency, the renminbi, “basically stable” despite calls by the United States and other developed nations to let its value increase.
He also repeated the concerns he voiced a year ago, at China’s last legislative session, that the United States is failing to rebuild its own economy and maintain the value of the dollar. Protecting the dollar, which dropped sharply since the global crisis began in late 2008, is a matter of “national credibility” for the United States, he said.
“Any fluctuation in the value of the U.S. currency is a big concern for us,” he said. “I hope the United States will take concrete steps to reassure investors. It is not only in the interests of the investors, but also the United States itself.”
Chinese leaders fear that the United States’ vast budget deficits will lead to inflation that effectively devalues the dollar, and thus the value of China’s vast foreign-currency reserves. Those reserves exceeded $2.4 trillion at the end of 2009, with nearly $900 billion of that in dollar-denominated Treasury bills.
Mr. Wen’s most pointed remarks, however, were aimed at critics of China’s economic policies, led by the United States. Those critics accuse China of keeping the value of its currency artificially low, so that its exports will remain cheap compared to other nations’ competing products. That boosts China’s economy, but at the expense of other trading partners, they say.
China has pegged the renminbi to the declining value of the dollar since the economic crisis began in late 2008. Were it to let the market judge the renminbi’s value, critics say, the currency — and the cost of Chinese products — would rise.
In Sunday’s news conference, Mr. Wen bluntly rejected that view. Instead, in remarks that seemed aimed at the United States, he accused unnamed competitors of trying to bail out their own slumping economies by hamstringing the Chinese juggernaut.
“I understand some economies want to increase their exports,” he said, “but what I don’t understand is the practice of depreciating one’s own currency and attempting to force other countries to appreciate their own currencies, just for the purpose of increasing their own exports.”
That amounts to trade protectionism, he said, and “all countries should be fully alarmed by such developments.”
Some economic analysts were struck by the comments.
“I think it’s my first time hearing government officials saying that. Basically, Premier Wen said it’s a kind of protectionism to ask other countries to appreciate their currency and depreciate their own currency,” Shen Minggao, the chief China economist for Citibank in Hong Kong, said in a telephone interview. “In that sense, it’s a new understanding of currency policies.”
Mr. Wen argued that the renminbi is not unfairly valued, citing government calculations that suggested that, measured in real terms, China’s currency had actually risen in value at the height of the economic crisis.
One leading Chinese economist, Bai Chong-En of Beijing’s Tsinghua University, said in an interview on Sunday that for a broad range of technical reasons, he does not believe that the renminbi is seriously undervalued. But he also suggested that Western jawboning to revalue the currency is having the opposite effect.
“The greater the outside pressure, the more difficult it is for the Chinese government to raise the exchange rate, and the more difficult it is for the Chinese people to accept a revaluation of the Chinese currency,” he said. “People don’t like to be forced to change things. They have be willing to do it.”
In his wide-ranging news conference, which drew on both Chinese and foreign questioners, Mr. Wen repeated some boilerplate government positions — China is an underdeveloped nation that will need a century or more to reach advanced status, he said — and a few new ones.
Addressing a chorus of complaints by foreign investors, he said China will “put in place institutional arrangements to level the playing ground” for foreign companies in China, and promised to personally meet with foreign business leaders during his final years in office. Some of China’s economic stimulus measures, such as subsidizing purchases of new automobiles and home appliances, applied to products by foreign as well as domestic manufacturers, he noted.
He also said that he had been excluded from a crucial meeting of world leaders at last year’s Copenhagen conference on climate change, and had not deliberately skipped the meeting, as some at the conference charged. Mr. Wen’s absence from that session, which was attended by President Obama and other leaders, has been touted by critics as a symbol of China’s intransigence on climate issues at the conference, which ended without reaching many of its key goals.
“Why was China not notified of this meeting? So far no one has given us any explanation about it, and it still is a mystery,” he said.
Mr. Wen’s news conference was broadcast nationally, but in Beijing, that reply and several following minutes of the broadcast were abruptly cut off by what was described as a loss of the television signal.