From Chinese Press

Creditor image overstated

(China Daily)
Updated: 2010-08-20 06:10

As the world's biggest creditor today, China has to provide loans for developed countries at a low interest rate when, as the largest developing country, it still has to lift millions of its people out of poverty. Its role as a creditor should not be overstated and other countries should not burden it with more responsibilities, says an article in People's Daily. Excerpts:

China does not meet certain conditions for being a well-developed creditor nation. Despite its continuous economic growth and rising trade surplus, its currency still doesn't have much influence on major international organizations such as the International Monetary Fund, and the international monetary system.

Foreign-funded companies in China have been increasing their investment. As a result, China's exports have grown and trade surplus increased. And it cannot offer enough yuan to offset the inflow of dollars into the country.

Being the world's largest producer, China saves more than it spends as opposed to some developed countries.

China has to face the risk of being a creditor nation. There is already a trade deficit in China's overseas assets, which comprises mainly US bonds and therefore is settled in dollars, and not yuan. So any rise in the value of the yuan will result in a heavy loss to China.The reason why some countries are overstating China's responsibility as the biggest creditor is the imbalanced monetary system. The existing system should be reformed and the international currency diversified. And China is ready to take active part in the reform and internationalize its yuan.

It's for the US, as the issuer of the international currency, not to shirk its responsibility; it should adopt a moderate financial policy, increase it exports and its domestic savings.

(China Daily 08/20/2010 page9)