BEIJING (Reuters) ? China urged the Obama administration to block a U.S. bill aimed at pressing Beijing to lift the yuan's value, raising the risk of further strains between the world's top two economies even if warnings of a "trade war" remain just talk.
Washington's effort to force Beijing's hand may have the opposite effect, at least for now. Currency investors are already pricing in the risk that China could tighten its leash on the yuan to demonstrate its grip over the currency.
The bill is a protectionist step that "gravely violates World Trade Organization rules," Foreign Ministry spokesman Ma Zhaoxu said after the U.S. Senate approved it in a 63-35 vote and sent it to House of Representatives.
"China urges the U.S. government, Congress and all quarters to resolutely oppose using domestic legislation to create a fuss about and put pressure on the renminbi exchange rate," said Ma in comments on the ministry's website (http://www.mfa.gov.cn).
The "renminbi," or "people's currency," is another name for China's yuan currency.
The legislation will "disrupt the shared efforts of China and the United States, as well as the international community, to promote vigorous recovery and growth in the global economy," said Ma.
His condemnation was echoed by China's Ministry of Commerce and the People's Bank of China, the central bank, which said the yuan exchange rate was "reasonable."
Chinese officials and media have warned that the legislation could trigger a "trade war" of escalating protectionist tit-for-tat retaliation.
China's official Xinhua news agency said on Wednesday that "what the U.S. Senate did planted a ticking time-bomb that may ignite a potential trade war."
BLUSTER
On the face of it, China has major weapons to strike back at the United States if the currency legislation is passed. It is America's biggest foreign creditor and its fastest-growing major export market.
But such shapeless threats are more bluster to reassure domestic audiences than a real option, said Yi Xianrong, an economist at the Chinese Academy of Social Sciences, who said the risk of an escalating cycle of trade retaliation was scant.
"A trade war won't break out, it just won't. It's just to give it a scare," he told Reuters of the warnings from Beijing to Washington.
"The reaction has been excessive. Many people have called for payback by selling off (Chinese holdings of) U.S. government debt. That would be utterly foolish," he added.
But China could nonetheless adopt retaliatory steps against some U.S. goods and companies if the bill ever passes into law, said several other economists and foreign policy analysts.
Although the currency bill faces high hurdles to becoming law, Beijing appears worried that it could signal more feuding with the United States in 2012, when President Barack Obama faces a tough fight for re-election and China's Communist Party will navigate a leadership handover.
"The election race is already having an impact, and it will certainly expand," said Jin Canrong, a professor at Renmin University in Beijing specializing in Sino-American relations.
"Because of the state of the U.S. economy, trade issues will be the focus of that impact," he added, noting criticism of China from Republican candidates, including Mitt Romney.
"If this bill is passed, and the United States exacts tariffs as the bill demands, I think China will respond by imposing tariffs on some U.S. products," said Jin.
The angry exchanges could stoke investor jitters even if they remain just words, Barclays Capital said in a client note.
"The Senate's passage is already sufficient to sour the atmosphere for bilateral cooperation at a time when it is most needed to maintain global growth and stability," it said.
"In the unlikely scenario that the bill becomes law and the U.S. penalizes Chinese exports, China might retaliate, for instance by taxing U.S. MNCs (multinationals) in China."
Ties between Beijing and Washington have also been troubled by disputes over China's fetters on dissent and on the Internet, regional military and security tensions, and U.S. arms sales to Taiwan, the self-ruled island claimed by China.
YAWNING DEFICIT
China controls the pace of yuan exchange rate movements by setting a daily mid-point from which the currency can rise or fall 0.5 percent versus the dollar each day, and also by intervening in trading on the domestic market.
On Wednesday, traders pushed the yuan to its lower daily limit, reflecting sentiment that the central bank will keep the yuan on a tight leash to signal to Washington that it will not be pushed around.
Many U.S. lawmakers, trade unions and manufacturing lobbies say China holds down the value of the yuan to give its exports an unfair edge in global markets.
Both governments have pledged to address imbalances, but the U.S. trade deficit with China in 2010 rose to a record-breaking $273 billion, up from about $227 billion in 2009, U.S. data shows.
In China, many officials worry that moving faster to raise the value of the yuan could hurt exports and the tens of millions of manufacturing jobs they create.
"Making groundless accusations about the renminbi exchange rate will not solve the United States' lack of savings, trade deficit or high unemployment rate," said the Chinese central bank in response to the U.S. Senate passing the bill.
"But it could seriously disrupt the exchange rate reforms that China is undertaking."
China says it is committed to gradual currency reform and notes the yuan has risen 30 percent since July 2005, when Beijing revalued the currency.
The proposed Currency Exchange Rate Oversight Reform Act of 2011 would allow the U.S. government to slap countervailing duties on goods from countries found to be subsidizing their exports by undervaluing their currencies.
But before President Barack Obama could be forced to decide whether to sign the bill into law, it must first win approval from the House of Representatives, where key Republicans have indicated they dislike the tariff threat.
The American Chamber of Commerce in China, which represents many firms with business there, also repeated its opposition to the legislation in an emailed statement.
"The Senate bill would damage the bilateral trade and investment relationship, weaken our standing in the World Trade Organization, and damage our national interests," said Ted Dean, the chairman of the chamber, which has headquarters in Beijing.
(Additional reporting by Aileen Wang and Sabrina Mao; Editing by Ken Wills and Neil Fullick)
google street view google street view gluten free diet oprah winfrey iaa blackberry torch 2 the closer
No comments:
Post a Comment