China‘s yuan is at an equilibrium against the dollar and even high in some respects, the country’s main official newspaper said on Friday in remarks that could sow further tension in talks between Beijing and Washington.
The People’s Daily, the mouthpiece newspaper of the ruling Communist Party, said differences in labour productivity and operating costs in the world’s two biggest economies show the yuan, or the renminbi, is reasonably valued versus the dollar.
The article came just a day after U.S. Treasury Secretary Timothy Geithner, in China with Secretary of State Hillary Clinton for annual talks with Beijing, repeated calls for China to have a stronger yuan to create room for more flexible policy.
“At the present stage, on the basis of value, and balanced supply and demand, the renminbi exchange rate is basically at a reasonable equilibrium,” said the article, written for the paper by the Chinese Academy of Social Sciences, the country’s top think tank.
It argued there was no need for the renminbi to rise further, especially since comparisons of labor, raw material and what the article called ‘environmental costs’ – which were not explained – show they are much lower in China than the United States.
“If the renminbi exchange rate is measured against the ‘three lows’ in Chinese costs, it will be high at present,” the newspaper said.
Labor productivity comparisons also showed the yuan was fairly valued, the People’s Daily said, adding that rises in the value of the Chinese currency between 2008 and 2010 outstripped the country’s productivity gains in that period.
It said U.S. productivity was 5.4 times that of China in 2010, slightly under 6.1 times in 2008, and 12.6 times as high in 2000.
The yuan rose 10.5 percent against the dollar between 2008 and 2010 and has climbed around 31 percent in nominal terms since a landmark revaluation in 2005.
The yuan’s value has been a lightning rod in Sino-U.S. ties, with some in Washington accusing Beijing of deliberately holding down the currency to gain export advantage.
China denies the allegation and says it too wants a currency whose value is decided by the market, but insists any changes to its foreign exchange policy must be gradual.
It took a milestone step of widening the yuan’s daily trading band last month to let the currency rise or fall 1 percent from a mid-point set by the central bank, compared to a band of plus or minus 0.5 percent before.
But even with incremental reforms, China still keeps the yuan on a tight leash, in part to protect its vast export industry, a huge employer in the country.
Although the latest comments in the People’s Daily may not have been authorised by Chinese leaders, they likely reflect the thinking in Beijing and demonstrate the tensions between the world’s two biggest economies on a key issue.
The annual Strategic and Economic Dialogue talks between the U.S. and China have already been upstaged this year by a row over a Chinese dissident who sought refuge at the U.S. embassy after escaping 19 months of house arrest.
The incident, which exposed uncomfortable differences on human rights between the two powers, escalated on Thursday when the blind dissident, Chen Guangcheng, made a dramatic plea for help to a U.S. congressional hearing from his hospital bed in Beijing.
- U.S. politics clash with reality over China currency (chinadailymail.com)
- Timeline: China’s reforms of yuan exchange rate (chinadailymail.com)
- US happy with outcome of talks with China (todayonline.com)
Categories: Finance & Economy