Commentary: Push for China currency bill based on an error

By Xia Wenhui (Xinhua)

10:52, September 17, 2011

BEIJING, Sept. 16 (Xinhua) -- U.S. Senate Democratic leader Harry Reid's recent drive for a bill aimed at forcing up the Chinese currency erroneously links the yuan to his country's depressed job market.

Reid may argue an undervalued yuan has cost many U.S. manufacturing jobs by giving China's factories unfair advantages.

It's easy for U.S. lawmakers to blame the huge U.S. trade deficit on China, which hit 273 billion U.S. dollars in 2010, when they search for reasons why more Americans cannot get jobs and are unhappy with the economic situation.

But Reid cannot deny the fact that the key reason for the current 9.1 percent unemployment rate is the lagging U.S. economy, which has no immediate link with the yuan.

Many analysts have agreed with this point. Phillip Swagel, a scholar with the American Enterprise Institute for Public Policy Research, has said a sharp appreciation of the yuan will only lead to an increase of 30 percent in U.S. commodities prices, adding more interest costs for government, enterprises and citizens.

A stronger yuan would not fundamentally change the structural problems that existed in the U.S. economy, such as unemployment and the trade deficit, said Swagel, who is also a former assistant secretary for economic policy at the U.S. Treasury Department.

Moreover, a mutually beneficial trade and economic relationship between the United States and China conforms to the common interests of the two countries.

As bilateral trade reached 285.65 billion dollars in the past eight months, Reid should agree that a stronger U.S.-China trade relationship in the past three decades has brought vast job opportunities for the two nations.

A sharp appreciation of the yuan will only deal a grave blow to China's foreign trade and hurt its economy. And a volatile Chinese market will not help U.S. President Barack Obama's ambition to dramatically boost U.S. exports to China.

Now with Obama asking the Congress to pass a jobs-creation package to cut tax and raise money, the White House is trying to boost growth and find more chances for trade and manufacturing.

For Beijing, a better economic relationship with the United States means smooth trade and strong support of the economy, especially when the world is on the edge of new economic turmoil.

Chinese Premier Wen Jiabao said Wednesday at the World Economic Forum Summer Davos meeting in northeast China's port city of Dalian that China was willing to boost financial and economic cooperation with the United States and an open U.S. market and robust exports should be better options for both countries.

For the United States, lowering its barrier for investment and loosening its controls on exports to China would be more helpful than forcing the yuan's revaluation.

Reid was no more than playing politics when he pushed the China currency bill in Congress, not the first time in recent years. The move will do no good for either the Chinese or the U.S. economies. 

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