China rebuts Obama's remarks on yuan
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China's central bank said Friday a stronger yuan offers no help for solving the Sino-U.S. trade imbalance problem, and China opposes politicizing yuan's appreciation.
Su Ning, vice governor of the People's Bank of China, made the comments a day after U.S. President Barack Obama told the U.S. Export-Import Bank's annual conference that a more market-oriented exchange rate of yuan will make an essential contribution to global rebalancing efforts.
"We do not think a country should rely others to solve its own problems," Su, a member of the Chinese People's Political Consultative Conference (CPPCC) National Committee, said on the sidelines of the top political advisory body's annual session.
The U.S. Department of Commerce said on March 11 that the U.S. trade deficit with China increased to 18.3 billion U.S. dollars in January from 18.14 billion U.S. dollars in December. The increase renewed the U.S. call for a stronger yuan as it claimed the current exchange rate gives Chinese goods unfair price advantages.
Su said although yuan has gained more than 20 percent since it depegged the U.S. dollars in June 2005, China's trade surplus tripled from 100 billion U.S. dollars in 2004 to nearly 300 billion U.S. dollars in 2008.
In addition, he argued, a weaker U.S. dollar does not help cut the U.S. deficit. As the U.S. dollar depreciated by 3 percent annually in average between 2002 and 2008, its deficit soared from 500 billion U.S. dollars to 900 billion U.S. dollars, Su said.
Tan Yaling, a financial researcher with Peking University, said as nations have different roles in international trade and differ in resources, what they produce, consume and want can be very different.
"It is unfair that the United States, on the one hand, consumes cheap Chinese goods, while on the other hand, it blames the low prices for causing their domestic job losses," she said.
The Obama administration's continuous calls for a stronger yuan is actually aimed at diverting attentions from its domestic woes, experts said.
To grapple with high unemployment rate and uncertain recovery prospects, Obama has to do something on job promotion to secure victory in the mid-term election in November this year, said Chen Zhiwu, a financial professor with Yale University.
To curb soaring unemployment and boost growth, Obama has announced a special task force on a mission of doubling the U.S. exports in five years, as he said the U.S. can not "stand on the sidelines," as other countries are busy negotiating trade deals.
Cheng Enfu, a deputy to the National People' s Congress (NPC), China' s top legislature, said the consistent pressure from the United States is simply because of its pursuit of national interests.
"Over-fast appreciation of yuan does no good to the global economic recovery which is still fragile and uncertain," he said.
Zhu Yuchen, also an NPC deputy, said as China plays a leading role in global economic recovery, any drastic policy change will not only impair China's economy, but also the global recovery, which is not a responsible way.
President Obama's remarks also came a month ahead of a semiannual Treasury Department report that could label China as a currency manipulator.
Premier Wen Jiabao said in the government work report delivered to the NPC on March 5 that China will keep the yuan "basically stable" at an "appropriate and balanced" level.
HEFTY SURPLUS, BUT SLIM PROFITS
Although China has accumulated massive trade surplus over the past decades, that does not indicate the same profits, as more than half of China's exporters are foreign invested, lawmakers said.
Figures released by the Ministry of Commerce showed 55.2 percent of China's foreign trade was completed by foreign-invested businesses last year. And 56 percent of the exports were done by foreign companies in China.
Cheng Enfu said China only pockets paper-thin profits from the very end of the manufacturing chain, or processing and assembling work. However, the United States earn handsome profits from designing and distribution.
According to a study by researchers of the University of California, of the 299 U.S. dollars retail value of a 30-gigabyte video iPod in the United States, 163 U.S. dollars is captured by American companies and workers, and 132 U.S. dollars go to parts makers in other Asian countries, while the final assembly, done in China, cost only about 4 U.S. dollars a unit.
"Even though Chinese workers contribute only about 1 percent of the value of the iPod, the export of a finished iPod to the United States directly contributes about 150 U.S. dollars to our bilateral trade deficit with the Chinese," Hal R. Varian, a professor of the University of California at Berkeley, wrote on the New York Times on June 28, 2007.
Cheng Enfu noted it needs to upgrade exports product mix to fundamentally reverse China's disadvantages. That is, to export more profitable self-innovative products, rather than labor-intensive processing goods.
