Obama's first steps fuel new optimism

By Zhu Ping (China Daily)
Updated: 2009-11-18 07:32

China and the United States laid aside the issue of monetary exchange rates and reiterated the urgency to resist trade protectionism in a joint statement released Tuesday.

"Both sides will also pursue forward-looking monetary policies with due regard for the ramifications of those policies for the international economy," the statement read.

Yao Yang, deputy dean of the School of National Development of Peking University, told China Daily: "The statement stops at monetary policy without mentioning the exchange rate. That means the two countries have temporarily put aside the controversy."

He said the US should not transfer the pain of the financial crisis to other countries by continuing to depreciate the dollar. China, the largest holder of US government debt, holds more than $800 billion in US debt and $2 trillion in foreign reserves, he said.

"The renminbi is not undervalued as some Western economists estimate," Yao said. "Furthermore, China helped all of Asia by resisting devaluation during the 1997 Asian financial crisis."

On Monday, a spokesman for the Chinese Ministry of Commerce said: "If the US only asks other countries to raise the value of their currencies, but continues to devalue the dollar, it is not only bad for the global economic recovery, but also unfair."

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But China is also making concessions as the two countries try to seek a new economic balance, Yao said.

The statement declares that China will adjust its economic structure, raise household incomes, expand domestic demand and reform its social security system, while the US will encourage private savings.

Although he was not optimistic about future trade frictions, Yao said: "The statement's commitment to jointly fight protectionism at least showed the US government admitted its protectionist practices were wrong."

The economist said the statement indicated China may increase its votes in the International Monetary Fund, as "the two sides stressed the need to follow through on the reform of quota and voting shares of international financial institutions as soon as possible, increasing the voice and representation of emerging markets and developing countries."

Wang Yusheng, a Beijing based-researcher and former Chinese diplomat, said: "The statement coordinates the two countries' stances and increases consensus. But the key is how both sides will act in the next phase."

In Wang's view, "the US can increase its hi-tech exports to China instead of putting pressure on the yuan to appreciate or turning to trade protectionism".

(China Daily 11/18/2009 page2)

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