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Yuan's adjustment will continue

By Zhang Jin (chinadaily.com.cn)
Updated: 2010-04-09 16:49

The guessing game surrounding the Chinese currency continues after US Treasury Secretary Timothy Geithner's visit to Beijing. Some analysts now believe that the visit is a fresh signal that Washington won't press Beijing so hard to appreciate the yuan, while others say the US adopted delay tactics to win China's support on some imminent international affair such as the Iran nuclear issue.

Citing an unemployment rate of 10 percent, US lawmakers are eager to label China a currency manipulator, a move they believe could keep Chinese imports at bay and thus save US jobs.

But such a big-stick policy will only complicate the matter.

Indeed, the yuan's upward movement came to a halt only after the global financial crisis hit two years ago, when China's export sector, an engine of the country's economy, lost steam and triggered massive layoffs. In this sense, the pause of the yuan appeared to be an interim measure.

Chinese policymakers have realized the negative side of a heavy reliance on cheap exports and are determined to prompt the country's industries to climb up the value ladder. This shift has been made evident as Beijing phased out favorable tax rebate policies for most of the exports since it became a World Trade Organization member in late 2001.

Therefore, we have confidence to believe China will accelerate industrial adjustment as the effect of the financial crisis ebbs.

But Beijing will chart the course of the yuan on its own initiatives, instead of bowing to the big stick.