March 26, 2010, 8.23 am (Singapore time)
China yuan decision hinges on jobs: PBOC adviser
BEIJING/SHANGHAI - China could move again to greater flexibility in its currency regime but needs to take domestic factors such as employment into account when deciding whether to do so, a central bank adviser said in remarks published on Friday.
In an op-ed article titled 'Toying with yuan won't help us,'Fan Gang, the only academic member of the People's Bank of China's monetary policy committee, wrote that a rise in the currency itself was not a solution for US economic problems, including employment.
Mr Fan did not rule out a move by Beijing to let its currency become more flexible, but he argued for greater understanding of China's own domestic concerns, as friction over the yuan grows ahead of a US Treasury report due on April 15 that could label Beijing a 'currency manipulator'.
'China may resume a 'managed float' of its exchange rate, particularly if the uncertainty of the overall post-crisis economic situation diminishes,'Mr Fan wrote published in the official English-language China Daily.
'In choosing whether or not to do so, its policymakers may weigh factors ranging from China's international responsibilities to the potential damage of foreign protectionism or even a trade war.
'What is certain, however, is that China's politicians have a domestic agenda just like the Americans. The key element of that agenda is to maintain employment growth.'
China has kept the yuan, or renminbi, effectively pegged around 6.83 per dollar since mid-2008, when the impact of the global financial crisis started to take a toll on its exporters.
'Flawed analysis'
Pressure has since mounted for Beijing to loosen the reins again, with some members of the US Congress and industry bodies blaming China for widespread job losses in the United States.
Mr Fan rejected such criticism.
'The US' internal and external deficits remain large, and its unemployment rate is extremely high. Someone needs to take responsibility, and since US politicians don't want to blame themselves, the best available scapegoat is China and its exchange rate, which has not appreciated against the dollar in 18 months,' he said.
Chinese policymakers and analysts are not alone in rejecting claims that China is responsible for the loss of millions of US jobs.
A recent report by the left-leaning Economic Policy Institute that said unfair Chinese trade and currency practices caused the loss of as many as 2.4 million US jobs between 2001 and 2008 is based on 'flawed analysis', the US-China Business Council (USCBC) said this week.
The report was 'built on the faulty assumption that every product imported from China would have been made in the US otherwise,' John Frisbie, president of the USCBC said in a statement.
A stronger yuan could also create other difficulties for the United States, Mr Fan said, including pushing up inflation, which he said could prompt the Federal Reserve to tighten monetary policy and thus possibly undermine the US economic recovery.
Mr Fan acknowledged that China should fix problems including distortions in the prices of energy and other resources, and that of excess savings, which contribute to economic imbalances.
However, he noted that Beijing needed to ensure that it offer a better standard of living to the country's hundreds of millions of farmers, many of whom have found a way out of poverty by migrating to cities to work in the factories that churn out consumer goods for Western markets.
'Getting more farmers into better-paid manufacturing and service-industry jobs will mean not only a reduction in poverty, but lower income disparity. By any moral standard, that goal is at least as important as anything on America's agenda,' he said. -- REUTERS
China yuan decision hinges on jobs: PBOC adviser
BEIJING/SHANGHAI - China could move again to greater flexibility in its currency regime but needs to take domestic factors such as employment into account when deciding whether to do so, a central bank adviser said in remarks published on Friday.
In an op-ed article titled 'Toying with yuan won't help us,'Fan Gang, the only academic member of the People's Bank of China's monetary policy committee, wrote that a rise in the currency itself was not a solution for US economic problems, including employment.
Mr Fan did not rule out a move by Beijing to let its currency become more flexible, but he argued for greater understanding of China's own domestic concerns, as friction over the yuan grows ahead of a US Treasury report due on April 15 that could label Beijing a 'currency manipulator'.
'China may resume a 'managed float' of its exchange rate, particularly if the uncertainty of the overall post-crisis economic situation diminishes,'Mr Fan wrote published in the official English-language China Daily.
'In choosing whether or not to do so, its policymakers may weigh factors ranging from China's international responsibilities to the potential damage of foreign protectionism or even a trade war.
'What is certain, however, is that China's politicians have a domestic agenda just like the Americans. The key element of that agenda is to maintain employment growth.'
China has kept the yuan, or renminbi, effectively pegged around 6.83 per dollar since mid-2008, when the impact of the global financial crisis started to take a toll on its exporters.
'Flawed analysis'
Pressure has since mounted for Beijing to loosen the reins again, with some members of the US Congress and industry bodies blaming China for widespread job losses in the United States.
Mr Fan rejected such criticism.
'The US' internal and external deficits remain large, and its unemployment rate is extremely high. Someone needs to take responsibility, and since US politicians don't want to blame themselves, the best available scapegoat is China and its exchange rate, which has not appreciated against the dollar in 18 months,' he said.
Chinese policymakers and analysts are not alone in rejecting claims that China is responsible for the loss of millions of US jobs.
A recent report by the left-leaning Economic Policy Institute that said unfair Chinese trade and currency practices caused the loss of as many as 2.4 million US jobs between 2001 and 2008 is based on 'flawed analysis', the US-China Business Council (USCBC) said this week.
The report was 'built on the faulty assumption that every product imported from China would have been made in the US otherwise,' John Frisbie, president of the USCBC said in a statement.
A stronger yuan could also create other difficulties for the United States, Mr Fan said, including pushing up inflation, which he said could prompt the Federal Reserve to tighten monetary policy and thus possibly undermine the US economic recovery.
Mr Fan acknowledged that China should fix problems including distortions in the prices of energy and other resources, and that of excess savings, which contribute to economic imbalances.
However, he noted that Beijing needed to ensure that it offer a better standard of living to the country's hundreds of millions of farmers, many of whom have found a way out of poverty by migrating to cities to work in the factories that churn out consumer goods for Western markets.
'Getting more farmers into better-paid manufacturing and service-industry jobs will mean not only a reduction in poverty, but lower income disparity. By any moral standard, that goal is at least as important as anything on America's agenda,' he said. -- REUTERS