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China denies yuan behind US trade gap

(Agencies)
Updated: 2010-03-16 15:34

BEIJING: China on Tuesday shunned mounting US demands for a stronger yuan, saying again that renminbi is not the cause of China’s big trade surplus and vowing to keep the currency stable to shore up exports.

"If the exchange rate issue is politicized, then in coping with the global financial crisis this will be of no help in coordination between the parties involved," Chinese Commerce Ministry spokesman Yao Jian told a regular news conference.

Yao rejected the argument that China's hefty trade surplus with the United States was due to the renminbi, which some US economists judge to be 25 percent or more undervalued.

"The trade surplus is not caused by the renminbi exchange rate. The trade surplus is an outcome and phenomenon of globalization. It will exist for a time," he said.

Yao was speaking a day after 130 US lawmakers demanded that President Barack Obama get tough with China over its currency practices, which they say undercuts the competitiveness of US manufacturers.

"The impact of China's currency manipulation on the US economy cannot be overstated. Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors," the legislators said in a letter.

Premier Wen on March 14 dismissed US complaints about China's exchange rate, calling them counterproductive and saying he did not believe the yuan was undervalued.

If the US Treasury does say that China is manipulating its exchange rate, the US government would be required in principle to start "expedited negotiations" on the issue.

"Adjustment in the renminbi exchange rate will be determined based on national economic conditions, and not because of external market pressures," Sun Lijian, an economist at Fudan University in Shanghai, told the China Economic Times on Tuesday.

No reason at all

Yao asked rhetorically whether China, which has a trade deficit with Japan, South Korea and some developing countries, should copy the United States and pass a law to deal with those countries.

"So we hope that in surmounting the crisis and reviving its economy, the United States should be a promoter of free trade, not an obstacle to it," he said.

The United States' annual trade gap with China fell to $226.8 billion in 2009, down from a record $268 billion in 2008. But with the Obama administration keen to lift exports and employment, the deficit remains a point of friction between the two countries.

Wen on March 14 recommitted China to pushing ahead with reform of the yuan's exchange rate mechanism, leaving the door open to reintroducing exchange rate flexibility if it suits Beijing.

China has kept the yuan pegged around 6.83 per $1 since July 2008 to help its exporters, and Yao, the Commerce Ministry spokesman, said stability would remain the watchword in 2010.

"We have no reason at all to view the future market with unfettered optimism," he said of the outlook for exports.

"So we will keep our economic and trade policies, including exchange rate policies and export tax rebates, stable this year," he added.