Skip to comments.China put on notice over its currency(cornered by G7)
Posted on 04/18/2005 10:07:04 AM PDT by TigerLikesRooster
China put on notice over its currency
By Andrew Balls and Scheherazade Daneshkhu in Washington
Published: April 17 2005 19:11 | Last updated: April 17 2005 19:11
The Group of Seven leading industrialised countries this weekend put China on notice that it must shift to a more flexible currency regime, with finance ministers demanding it take action immediately.
Officials said there was no discussion of singling out China because in the statement the language was already clearly aimed at Beijing - and because of the difficulty of getting Japan to agree a formal declaration.
But ministers from all the countries apart from Japan backed a US demand that China should act immediately.
John Snow, US treasury secretary said after the G7 meeting that China has had long enough to prepare its financial system, and more than two years of engagement with the US and the rest of the G7 on currency reform.
"With this groundwork in place, China is ready now to adopt a more flexible exchange rate," he said.
One senior official from a G7 country said: "It's not a question of threatening China but of recognising that this is getting urgent."
Greater currency flexibility is seen by the G7 as necessary to encourage other Asian developing countries to let their currencies rise against the dollar and promote domestic-led growth.
The US call was backed up by the finance ministers from Germany, France and Canada, speaking in the sidelines of the weekend meetings.
Mr Snow said the G7 had "put a clock" on the required actions by countries to help reduce global imbalances, including reducing the US budget deficit and promoting faster growth in Japan and Europe. That progress would be reviewed in an audit at the annual meetings of the International Monetary Fund and World Bank in September, he said. The US expects action from China within that timeframe.
China's top officials were not present in Washington this weekend, but have attended special sessions at the last two G7 meetings, and are expected to attend later in the year.
Sadakazu Tanigaki, Japan's finance minister, said China should be left to decide when to change its currency regime.
Reasons for Japan's reluctance to press China include a show of regional loyalty, and concerns about anti-Japanese sentiment and protests in China, officials from other countries said.
Japan's current account surplus is also four times larger than China's in dollar terms.
The hardening of US rhetoric came before the meeting, reflecting pressure on the Bush administration from Congress and small business groups.
There is concern that the US Treasury's gentle diplomacy may have made Beijing feel there was no urgency.
Why do the democracies let communist dictatorships get away with all kinds of obvious misbehavior? They didn't even name China for various pusilanimous reasons. Oy.
They need to raise the value of their currency...Ours is lowering, but not enough...Must be an equitable line there somewhere...
Japan's reasons are actually a bit more complex than the article's dismissive "[R]easons for Japan's reluctance to press China include a show of regional loyalty, and concerns about anti-Japanese sentiment and protests in China, officials from other countries said"; Japan has to navigate very complex currency issues since they themselves do significant currency manipulation, and floating the yuan against the yen or dollar doesn't make that necessarily simpler.
How about a call for the U.S. to reduce gasoline usage by half for the same reasons?
On balance, the U.S. has always had a political problem insisting on balanced, bi-lateral trade. We have always taken it in the shorts -- by our own choice, or more properly, by Washington's choice.
And what steps have you taken to halve your gasoline consumption since you're so obviously concerned?
How do you suggest that we lower our gas usage??
Gasoline is running on a free market. The yuan is on an artificial peg which makes the whole system unbalanced. Completely different situations.
I now drive a car which gets twice the gas mileage of my old one. I live in an extremely well-built house which requires very little energy to heat or cool...and I made sure I chose wisely when purchasing a heater. I've cut my driving to an absolute minimum.
And what have you done? Probably nothing.
More to the point, my post was intended to point out the lack of seriousness of the G-7 communique. China was being asked to adopt policies which would benefit G-7 (and us in particular), not itself.
Naw, I'm still on planning on to buy a suv.
The yuan is on an artificial peg which makes the whole system unbalanced.
Neither market is completely free or controlled...and I'm not splitting hairs here.
was it cutler, in for brinker, this weekend that said anytime the g-7 forces an asian country to float their currency, it's always followed by a downturn for that country?
breaking the chinese currency peg is the key to the US not slipping into recession. right now, the amount of US business investment that is taking place in china is staggering - I see it everyday in the tech industry, its pouring into china. and its happening in manufacturing too. and we aren't just talking about toy making and cheap textiles.
china's 9% GDP growth is the reason why europe and japan have 0% growth, and the US can barely hold onto 3% GDP and is doing poorly on wage growth.
He/she must be EU. China has it made, and the reasons for giving that up will need to be substantial. So don't expect China to give in until some kind of economic suffocation is imposed by her trading partners.
How's about we just raise the price of gas to the point where it a) cuts usage and b) encourages subsitution or development of alternative sources? That is how it is done under capitalism.
China will have to move to a more flexible exchange rate system. The market force alone will dictate it, when it costs them more to import raw materials than to export finished products.
Let's just hope they do it slowly and in a controlled manner. Otherwise, the rise in inflation here will really hurt.
that's fine with me. the alternative is that we allow the peg to remain, and the artificially low cost environment that it creates - suck up all the corporate investment from the US and western nations into it. Essentially, China is now an "enterprise zone" for US companies.
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