United States and European Union pushing Beijing to revalue the yuan
Beijing (AsiaNews/Agencies) – The United States and the European Union reiterated their demand that China revalue the yuan and stop giving its manufacturers unfair advantages. In response Beijing has said no but pledged a more effective monetary policy to slow inflation and keep growth in check.
US Treasury Secretary Henry Paulson said, whilst the pace of appreciation of China's currency “accelerated” in the past year, it still isn't “fast enough [. . .] to reduce China's global trade surplus.
Mr Paulson, who on 12-13 December will make his fifth visit to China since becoming Treasury chief, warned that tensions between the two countries might provoke “economic nationalism and protectionist sentiment.”
He noted that “China’s growth is helping the rest of the world and our interest is seeing that growth continue but to evolve into a more balanced growth” through reforms like currency liberalisation, which experts believe is in the interests of China itself as a way to contain its growing inflation.
Last month China's trade surplus swelled to a record US$ 27 billion. Its currency, the yuan, appreciated 11.7 per cent since it abandoned the peg in July 2005. Over the same period it dropped more than 8 per cent against the euro, making European goods more expensive in China than those from the United States and Japan.
For its part the European Union continues to demand the revaluation of the yuan, accusing Beijing of providing Chinese companies with under-priced steel which helps Chinese manufacturers undercut their competitors by as much as 25 per cent and flood the European market.
Last month Beijing settled a similar dispute with the United States and Mexico, accepting that starting January 1 it will end subsidies and tax breaks for domestic manufacturers that export into those markets.
China also has to cope with its growth rate, which rose by 11.5 percent in the third quarter of this year over last and has fuelled the highest inflation rate in a decade. The situation is such that many are concerned that price hikes in the food sector might spill over into other sectors.
Experts expect the real estate market to boom again following the government’s announcement that it will build low cost housing to re-distribute the benefits of economic growth.
Similarly, Beijing yesterday announced that its monetary policy in 2008 will shift from prudence to a tighter fiscal stance, bearing out expectations that policymakers would take be tough on inflation.
However, experts note that other measures taken so far like higher interest rates and borrowing costs have fallen far short of their goals. (PB)