Obama should get tougher as China flouts currency warnings!

Obama should get tougher as China flouts currency warnings!

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Globe Editorial

Obama should get tougher as China flouts currency warnings

March 22, 2010

CHINA’S POLICY of depreciating its currency against the dollar has been depriving the United States of jobs and economic growth while stimulating Chinese exports and creating more jobs there. The Obama administration has spent a year politely asking China’s leaders to let their currency appreciate in value. The response has been a Beijing version of the Bronx cheer. President Obama needs to recognize that efforts to cajole China’s leaders into becoming fair traders are going nowhere. America still holds the winning cards in any contest of wills with China; Obama must be ready to play them.

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COMMENTS (18)
China’s Premier Wen Jiabao was playing fast and loose with the truth two Sundays ago when he defended his country’s beggar-thy-neighbor exchange rate policy by saying, “I do not think the [currency] is undervalued.’’ The number two man in the Chinese hierarchy then followed this shameless fib with a brush-back pitch. “We are opposed to countries pointing fingers at each other or taking strong measures to force other countries to appreciate their currencies,’’ he warned.

The reality is that China has been flagrantly manipulating its currency for the past two years. It has done so by buying dollars with its renmimbi — to prevent the renmimbi from soaring in value as China’s trade surplus increased. Current estimates are that the renmimbi could be undervalued by as much as 40 percent.

Obama should do precisely what China’s premier was warning other countries not to do: point fingers and take strong measures. On April 15, when the Treasury Department is required to give its biannual report identifying countries that are manipulating their currencies, it should so identify China. Then Obama should begin talking about slapping import duties on Chinese goods.

If Beijing were to retaliate by selling its dollar holdings, the effects would be beneficial for the US economy, causing a depreciation of the dollar and thereby stimulating US exports and raising the value of the renmimbi.

If China’s rulers do not want a trade war, they must stop conducting a commercial version of guerrilla warfare against their number-one trading partner.

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