The renminbi, estimated to be undervalued by 25-40 per cent, is a major point of dispute between China and the US. The artificially low currency, which acts as an effective subsidy to Chinese exporters, has raised complaints in the past, but since the havoc caused by the 2008 financial crisis, it has shot to the top of Washington’s list of concerns. With 15 million officially jobless, reviving the US economy and especially exports, has become the most critical issue.
Businessworld
Chinese mercantilist policy is increasingly seen as a major obstacle to the US recovery. Nobel laureate economist Paul Krugman has made a ‘back-of-the-envelope assessment’, which concludes that the negative shock resulting from the Chinese policy to rest-of-the-world net exports is loss of 1.4 per cent of GDP. He calculates that it translates to 1.5 million lost jobs in the US alone. Whether accurate or not, in the months leading to the 2010 mid-term Congressional elections, China is certain to be held responsible for some of America’s economic distress.
China Daily:
If Washington uses trade protectionist measures as a tool to pressurize Beijing, it would jeopardize its own interests, top legislators said during the ongoing sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). "It is not right for the US to blame China for its economic problems," Sun Zhenyu, a CPPCC member, told China Daily.
The US has imposed a series of trade remedy measures against Chinese products and attacked China's exchange rate policy. International investment banks, for example the US-based Goldman Sachs, are playing up the benefit of quicker and bolder renminbi revaluation. However, Li Ruogu, former vice-governor of the central bank and president of the China Exim Bank, warned that Beijing should not bow to pressure from other countries given the still unstable economic recovery. Although exports are rising, growth prospects remain unclear.
