China won't fold on RMB
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China Thursday urged the United States to "objectively and rationally" consider its renminbi exchange rate while economists said the country is not likely to bow to US pressure to hasten an appreciation of the yuan.
"China does not seek a trade surplus with the US," said Foreign Ministry spokesman Ma Zhaoxu yesterday.
The yuan's exchange rate against the dollar is largely at a reasonable level, he added, and the yuan's value is not a major element in the US trade deficit with China.
US President Barack Obama has vowed to "get much tougher" with China on trade and currency issues to fuel US exports and narrow its trade deficit with China, the world's largest exporter.
With the US promising to sell arms to Taiwan and Obama planning to meet with the Dalai Lama, analysts said the possibility of a speedy yuan appreciation is slim.
"Even if the yuan's value rises, it is China's own business," said Li Jian, economist with the research institute under the Ministry of Commerce. "China will not (appreciate the rate) in accordance with the US' demand."
He said the yuan's value will largely be stable this year without any sudden or quick revaluation.
What China should consider is its own economic stability, which bears heavily on the global economic recovery, analysts said. China reportedly contributed to about half of the global economic growth last year.
"Although China's export sector is recovering from deep slumps last year, its growth is not yet stable," said Liu Dongliang, currency analyst of the China Merchant Bank. "A quick yuan appreciation will be detrimental to China's economy, especially considering that the government is expected to gradually withdraw its stimulus policies."
China's stimulus package helped expand the economy by 8.7 percent year-on-year in 2009. Economists said that with the nation's exit strategy implemented, its economy could face the danger of a slowdown, especially in the second half of this year.
Analysts said the market expected the yuan's appreciation to lose momentum due to China's drive to stabilize economic growth this year.
"Even if the yuan appreciates, it should be done after the US softens its stance," Liu said.
China does not want to be seen as too responsive to US pressure and if Sino-US tensions continue, the possibility of a hasty yuan appreciation is slim, he said.
The nation, responding to the US' recent and provocative actions, has announced for the first time unspecified sanctions against US firms involved in the Taiwan arms sale. China said it will also curtail military exchanges with the US and cooperation on a range of global and regional issues.
Analysts said it is unreasonable to accuse China of manipulating its currency and trying to seek a trade surplus with the US.
It has been a long-standing theory that the different economic structures of the two countries account for their trade gap, due to China's relatively low costs in manufacturing and high production costs in the US.
"Even if the yuan appreciates and Chinese exports to the US are reduced, the US would import those goods from other low-cost countries," Li Jian said. It won't help employment in the US, he added.
Analysts also said that Obama's criticism of the yuan may be an appeal to a domestic audience rather than pressuring China.
Li Wei, a scholar on US studies with Tsinghua University, said that Obama is consistently riling China up these days because he wants to please voters and reverse his declining popularity as midterm elections draw near.
China's role as a rising power has also made the US feel uneasy, he said.
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