US President calls for China to revalue its currency
Updated February 4, 2010 20:46:28
United States President Barack Obama says he will increase pressure on China and several other Asian nations to increase the value of their currencies. President Obama said Asia will be America's biggest trade market in the future, and he wants to level the playing field for US exporters. The comments come at a sensitive time for US-China relations.
COCHRANE: Washington and Beijing are hardly seeing eye-to-eye these days. First it was the hacking of internet company Google in China, then the sale of billions of dollars worth of military hardware to Taiwan, and then Barack Obama's insistence that he will meet Tibetan spiritual leader, the Dalai Lama. Now President Obama has added to that list the touchy matter of China's currency.
OBAMA: One of the challenges that we've got to address internationally is currency rates and how they match up, to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price - that puts us at a huge competitive disadvantage.
COCHRANE: The Washington-based Peterson Institute for International Economics estimates that China's currency - the ren min bi - is 40 per cent below the value it should be against the US dollar. They say Hong Kong, Malaysia, Taiwan and Singapore also have undervalued currencies. This weekend, finance ministers and central bank chiefs will meet in Canada to discuss issues which include China's currency.
OBAMA: So the approach we are taking is to try to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways.
COCHRANE: Professor Yew-Kwang Ng, from the economics department at Monash University, says Washington's pressure on the issue of China's currency, may backfire.
NG: It could have the opposite effect. Some analysts say China will not want to be seen as conceding to US pressure on currency, while diplomatic ties are so strained.
COCHRANE: But Professor Yew-Kwang Ng from Monash University says a more valuable currency would benefit China's economy.
NG: Chinese products are already priced very low because of their low wages and because they have not included environmental costs and this is made worse by the low value RMB, their dollar value has been held artifically low. So that's making China sell its products too cheaply to the rest of the world.
COCHRANE: President Obama said that he's been criticised for his tough line on enforcing trade agreements, but made it clear that Asia is an important market for America.
OBAMA: I also believe that our future is going to be tied up with our ability to sell products all around the world and China is going to be one of our biggest markets and Asia is going to be one of our biggest markets. And for us to close ourselves off from that market would be a mistake.
COCHRANE: The US is treading a fine diplomatic and economic line. Remaining friends while pushing for currency reform could be a tricky, and US State Department spokeman Philip Crowley said its sometimes hard for competitive friends to play ball.
REPORTER: Do you really consider them to be friends?
CROWLEY: I would just say that what is going on here is the same kind of thing that's been going on at various times... Are there a lot of balls in the air today that perhaps might not have been there four to six months ago? Fair enough.
Updated February 4, 2010 20:46:28
United States President Barack Obama says he will increase pressure on China and several other Asian nations to increase the value of their currencies. President Obama said Asia will be America's biggest trade market in the future, and he wants to level the playing field for US exporters. The comments come at a sensitive time for US-China relations.
COCHRANE: Washington and Beijing are hardly seeing eye-to-eye these days. First it was the hacking of internet company Google in China, then the sale of billions of dollars worth of military hardware to Taiwan, and then Barack Obama's insistence that he will meet Tibetan spiritual leader, the Dalai Lama. Now President Obama has added to that list the touchy matter of China's currency.
OBAMA: One of the challenges that we've got to address internationally is currency rates and how they match up, to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price - that puts us at a huge competitive disadvantage.
COCHRANE: The Washington-based Peterson Institute for International Economics estimates that China's currency - the ren min bi - is 40 per cent below the value it should be against the US dollar. They say Hong Kong, Malaysia, Taiwan and Singapore also have undervalued currencies. This weekend, finance ministers and central bank chiefs will meet in Canada to discuss issues which include China's currency.
OBAMA: So the approach we are taking is to try to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways.
COCHRANE: Professor Yew-Kwang Ng, from the economics department at Monash University, says Washington's pressure on the issue of China's currency, may backfire.
NG: It could have the opposite effect. Some analysts say China will not want to be seen as conceding to US pressure on currency, while diplomatic ties are so strained.
COCHRANE: But Professor Yew-Kwang Ng from Monash University says a more valuable currency would benefit China's economy.
NG: Chinese products are already priced very low because of their low wages and because they have not included environmental costs and this is made worse by the low value RMB, their dollar value has been held artifically low. So that's making China sell its products too cheaply to the rest of the world.
COCHRANE: President Obama said that he's been criticised for his tough line on enforcing trade agreements, but made it clear that Asia is an important market for America.
OBAMA: I also believe that our future is going to be tied up with our ability to sell products all around the world and China is going to be one of our biggest markets and Asia is going to be one of our biggest markets. And for us to close ourselves off from that market would be a mistake.
COCHRANE: The US is treading a fine diplomatic and economic line. Remaining friends while pushing for currency reform could be a tricky, and US State Department spokeman Philip Crowley said its sometimes hard for competitive friends to play ball.
REPORTER: Do you really consider them to be friends?
CROWLEY: I would just say that what is going on here is the same kind of thing that's been going on at various times... Are there a lot of balls in the air today that perhaps might not have been there four to six months ago? Fair enough.