Appreciation of China’s currency won’t resolve the Sino-U.S. trade imbalance or the consumer debt, low savings rate and unemployment in the world’s largest economy, Qin Gang, spokesman for the Chinese foreign ministry said today.
China will reform its exchange-rate mechanism based on developments in the global economy and its own economic performance, Qin said in a statement on the foreign ministry website.
U.S. lawmakers said this month they will go ahead with legislation targeting the yuan just as leaders of both countries prepare to meet this month at a Group of 20 nations summit in Toronto.
The Senate will vote "soon" on a measure aimed at getting China to raise the value of its currency, Senator Charles Schumer of New York told Treasury Secretary Timothy F. Geithner at a hearing on June 11.
The yuan traded at 6.8323 to the U.S. dollar at the end of last week, according to data compiled by Bloomberg. The currency has been kept at about that level since July 2008, helping shield exporters from the global recession. China’s financial markets are closed through tomorrow for a three-day public holiday.
China hopes that U.S. politicians will "seriously consider" how to solve the structural problems in their economy and not blame others, Qin said today. The U.S. should not politicize the yuan or use it as an excuse for protectionism, he said in a statement in response to a question about the U.S. lawmakers’ proposal.
The yuan’s 12-month non-deliverable forwards were at 6.7415 per U.S. dollar as of this afternoon in Hong Kong, reflecting bets for a 1.2% strengthening over that timeframe, according to data compiled by Bloomberg. The contracts were pricing in appreciation of 3.2% at the end of April.
U.S. government data showed a $71-billion U.S. trade deficit with China for the first four months of the year, up 5.7% from the same period of 2009. China’s customs bureau puts the bilateral trade deficit at $43 billion U.S.
The exchange rate isn’t the main reason for the U.S. trade shortfall with China, Qin said, adding that the gap is due to the division of labor brought about by globalization. Washington’s restrictions on technology exports to Beijing are also an important reason for the imbalance, he said.
China will resume appreciation of its currency by June 30 to curb inflation while avoiding a one-time rise in value that might endanger export jobs, a Bloomberg survey conducted in April showed.
Qin reiterated the government’s position that any change in the yuan’s value will be done in a controlled, gradual manner, and according to the needs of the market. The yuan will be maintained at a reasonable, balanced level, he said.
