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China warns US against making yuan dispute a 'scapegoat' for a flagging economy
China has again warned the US not to use the dispute over the value of the Chinese currency, the yuan, as a “scapegoat” for its high unemployment and flagging growth prospects.
By Peter Foster in Beijing
Published: 6:30AM BST 15 Oct 2010
The artificially weak Chinese currency has become a political issue in the US where it is blamed for giving Chinese exporters an unfair advantage at the cost of US jobs. Photo: Getty
The remarks from China’s ministry of commerce came hours before the US was due to release a report on whether it considers China a “currency manipulator” as fears grow that tensions over the currency could lead to a protectionist trade war.
The report has been repeatedly delayed despite a growing chorus of demands from US legislators and union bosses for the Obama administration to take tougher action against China’s alleged trade distortions.
However Yao Jian, a Chinese Ministry of Commerce spokesman, rejected US complaints as unfair. “It's totally wrong to blame the yuan for the Sino-U.S. trade imbalance,” he said, “The Chinese yuan shouldn't be a scapegoat for the U.S.' domestic economic problems.”
The artificially weak Chinese currency, which some analysts say is trading up to 25pc below its true market rate, has become a growing political issue in the US where it is blamed for giving Chinese exporters and unfair advantage at the cost of millions of US jobs.
However China has repeatedly said it cannot afford the costs of substantially re-valuing the yuan at a time when global demand for its exports remains weak and the recovery from the global recession remains fragile.
“Job losses would hurt the Chinese economy and domestic consumption. A relatively large yuan appreciation would definitely hurt Chinese exports, so a stable yuan exchange rate is needed for domestic consumption and the stability of the world economy," Mr Yao added.
China has also said that legislation currently being formulated in the US to impose trade tariffs as a result of the yuan’s under-valuation would be in breach of World Trade Organisation regulations. China has allowed the yuan to appreciate by 2.65pc against the dollar since June when the country’s central bank pledged to allow the currency to rise gradually.
However the appreciation has been insufficient to quiet concerns in the US. The international row over the yuan is the headline dispute in a growing global battle over currency valuations, as many countries seek to maintain flagging growth by weakening their own currencies to prop up exports.
The issue of currency manipulation is expected to be the central theme of a meeting of Group of 20 finance ministers meet in South Korea on October 22-23 ahead of a heads of state meeting in early November. On Monday South Korea’s President Lee Myung-Bak, himself under pressure from Japan for the South’s own currency interventions, warned that failure to settle currency disputes could fuel protectionism and damage the world economic recovery.
“If the world fails to reach agreement on matters such as foreign exchange policy and insists on its own interests at a time when the global economy is in recovery phase, it will bring about trade protectionism and cause very difficult problems to the global economy," Mr Lee said.
