Wed, June 23, 2010
Business > Economy > Hu visits Canada, attends G20 Summit

G20 not the right place to discuss the yuan: FM

2010-06-18 02:42:57 GMT2010-06-18 10:42:57 (Beijing Time)  Global Times

The upcoming G20 summit is an "inappropriate" forum to discuss the yuan's value, China's foreign ministry spokesman, Qin Gang, said at a regular press conference in Beijing Thursday.

The yuan-related comments are the latest in an ongoing dispute with Washington over the value of China's currency, which the US believes is significantly undervalued, leading to an unfair advantage for Chinese companies.

Still, with the G20 summit set to start next week, tensions between the US and China are still considered lower from where they were just a few months ago, when the US drew China's ire with the sale of more arms to Taiwan. A strategic meeting three weeks ago is believed to have calmed some concerns on both sides.

Nonetheless, China said the June 26-27 summit isn't the right place to discuss the yuan.

"The yuan exchange-rate issue was not a cause of the international financial crisis, and it is not a hurdle for world economic recovery, rebalancing or sustainable growth," Qin said.

A senior Chinese official told Reuters Thursday that "If we allow the G20 to turn into a process of finger-pointing, then it will certainly send out a very confusing and misleading signal to the markets and to the general public."

These comments were made in response to renewed pressure from Washington on Beijing to let the yuan currency rise, with lawmakers threatening to vote on legislation to push China to make a move on the yuan.

"If China does not act, and the administration does not respond promptly thereafter, the Congress will act," Sander Levin, chairman of the House of Representatives Ways and Means Committee, said Wednesday in Washington at a hearing on China's trade policies.

Charles Schumer, a senior Democrat in the Senate, has proposed a bill that would allow US businesses to incorporate estimates of currency undervaluation in the "countervailing duties" they can impose on imports deemed to be unfairly subsidized, the Financial Times reported.

These threats follow comments by US Treasury Secretary Timothy Geithner, who said last week that the yuan was a hurdle to global rebalancing.

Complaints over the yuan's value have eased over the last two months as the euro crisis ran deep, but they resurfaced after China's trade surplus posted a surge of 48.5 percent in May from a year earlier, giving China a trade surplus of $19.5 billion, up from just $1.7 billion in April.

US data showed that its trade deficit widened slightly in April, with some economists arguing that the improvement in net trade and its contribution to US growth appeared to have stalled.

Zuo Xiaolei, chief economist of China Galaxy Securities, noted that some forecasts of Chinese trade figures are based on plausible analyses, which overestimate the European debt crisis' impact on China and doesn't account for its lagged effect.

In fact, she said, the hike of exports in May was because of a low comparison basis from the same period last year, which decreased by 25.9 percent.

Meanwhile, the growth of imports from the US and EU in May exceeded the rise of exports to these areas.

The mounting pressure of wage increases in some export-oriented companies also shows that the appreciation of China's currency, with export prices hard to be raised, can only reduce the room for labor income growth, she added.

Limited impact

Even if the yuan is as much as 40 percent undervalued against the dollar and is allowed to appreciate, the impact on US companies would be limited, perhaps increasing prices of Chinese goods around 10 percent, Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co, told the Wall Street Journal (WSJ).

John Frisbie, head of the US-China Business Council, said a political move by Congress would be mostly counterproductive, as legislation required to counter misaligned currencies would violate World Trade Organization rules, according to the WSJ.

Also, the US hasn't acknowledged China's market-economy status, though it did pledge during the strategic talks with China last month to seriously con-sider the issue and speed up the process, which is sure to face obstacles in the US Congress.

China has already stated that it would take both the international and domestic economic situation into consideration when it comes to deciding the timing of any change in the yuan's value, and it will commit to the exchange-rate reform at its own pace.

Arms sales to Taiwan

The foreign ministry spokesman urged Washington Thursday to strictly honor the commitment it has made in the three Sino-US Joint Communiqués and to stop its arms sales to Taiwan.

"US arms sales to Taiwan seriously harm the core interests of China, and the Chinese government firmly opposes it," Qin said at the press conference.

He was responding to questions about comments by US Defense Secretary Robert Gates, who defended US arms sales to Taiwan on Wednesday at a senate hearing after being questioned by Senate Intelligence Committee Chairwoman Dianne Feinstein.

Feinstein, who was in China last week, called the US arms sales to Taiwan "a substantial irritant" in relations between Washington and Beijing.

Gates defended the sales by citing China's growing anti-ship cruise and ballistic missiles opposite Taiwan, and said it was it was up to Congress and the White House to decide whether to change the way arms are sold to Taiwan.

But he acknowledged the concern over China's suspension of military contacts with the US as a fallout of the arms sales.

China suspended military-to-military contacts with the US after the Obama administration notified Congress in January of plans to sell Taiwan up to $6.4 billion in arms. Earlier this month, China also rejected a proposed visit by Gates.

Kang Juan contributed to this story

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