Opinion

The high cost of ignorance

By Liu Junhong (China Daily)
Updated: 2010-03-29 07:52

In its demands for China to revalue its currency, the US has turned a blind eye to changes in the Chinese economy

The campaign recently launched by some United States lawmakers to pressure China into appreciating its currency has brought a tit-for-tat war of rhetoric in Sino-US relation that has taken major steps back after US President Barack Obama's meeting with the Dalai Lama and its arms sale to Taiwan.

In so doing, politicians in the White House, who have long been preoccupied with bipartisanism, have shown their sheer ignorance of growing economic interdependence between the largest developed and developing countries and the US' political responsibilities as a superpower.

Since China's adoption of a fluctuating exchange rate policy, the yuan's value has increased by 21 percent since July 2005. Any reckless appreciations of the yuan's exchange rate against the dollar now will possibly bring catastrophic results to the Chinese economy and even the world.

The US should drop its theory that China's rapid economic recovery needs an appreciated yuan to offset the negative effects from the accelerated inflow of international floating capital into its territory, its growing foreign reserves, excessive fluidity and its emerging real estate bubbles.

The preconditions for an appreciated renminbi, China's currency, have tended to subside. Due to a steep drop in global demands following the global financial crisis, China's exports have sharply declined and many of its exports-dependent enterprises in coastal regions have been shut down. The adverse economic conditions, coupled with growing unemployment, have put pressure on the government and plunged the world's fastest-growing economy into a new round of industrial restructuring.

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Following the global financial crisis, the US became very active in trade protectionism. Due to a series of its self-saving packages - such as the "buying America" campaign, advocacy of thrift and measures to expand US exports - consumptions in the world's largest economy have declined and its deposit ratio has continued to rise. The long-controversial trade deficit with China has also narrowed, as indicated by the rate of container transportation across the Pacific Ocean. Statistics from Japan's Maritime authorities indicates that the containerized transportation bound to China from the US increased 16 percent last September from the previous year, a seven consecutive monthly increase.

In comparison, the volume from China to the US and other Asian nations declined by 13.4 percent during the same period and had a 27 monthly negative growth by the end of last year. At the same time, the capacity of US air and land transportations last year also surpassed the highest level of the previous year.