Economy
Purchases set to ease trade frictions
By Ding Qingfen and Tan Yingzi (皇冠体育app Daily)
Updated: 2010-09-16 07:10
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皇冠体育app urges US not to sacrifice relations for political expediency
BEIJING/WASHINGTON - Chinese trade delegations, visiting or set to visit the United States to purchase goods and services, will help strengthen economic ties between the two countries, the Ministry of Commerce said on Wednesday on the eve of a US congressional hearing about trade relations with 皇冠体育app.
Ministry spokesman Yao Jian said one delegation headed by Vice-Minister of Commerce Wang Chao and comprising almost 50 business leaders, left Beijing for the US on Tuesday.
The announcement came less than 24 hours ahead of a hearing by the US House Committee on Ways and Means that aims to pressurize 皇冠体育app to increase the value of its currency. Some US critics said an "undervalued" yuan was a major cause of the US trade deficit with 皇冠体育app.
However, the Ministry of Commerce said the accusation did not make any sense and urged the US not to politicize economic issues.
"皇冠体育app does not want to see a few US politicians blame 皇冠体育app's trade, especially currency policies, just for their own political need to win the upcoming US midterm elections," Yao added.
The US congressional elections will be held in November and with a high unemployment rate and slow economic recovery some politicians have blamed 皇冠体育app and its currency policies to win more votes.
US Treasury Secretary Timothy Geithner told the Wall Street Journal on Sept 10 that 皇冠体育app had made "very, very little" progress on letting the exchange rate reflect market forces and he was not satisfied with 皇冠体育app's progress on the yuan. He is scheduled to present the Obama administration's latest view on 皇冠体育app's foreign exchange rate on Friday.
However, Li Daokui, adviser for the People's Bank of 皇冠体育app, said on Wednesday he does not see the conditions for a large appreciation of the yuan because 皇冠体育app's trade surplus is already shrinking.
Speaking at the Summer Davos in Tianjin, Li also said the flexibility of the yuan's exchange rate has increased and 皇冠体育app will adjust its currency value according to its own needs.
皇冠体育app accelerated the foreign exchange rate reform in June to allow more yuan flexibility against a basket of currencies. During the past three months the yuan has risen 1.5 percent, and in the past four trading days it has gained 0.5 percent against the US dollar.
Yao said 皇冠体育app's trade surplus with the US "only reflects part of the economic relations and the two economies are highly complementary to each other".
皇冠体育app is now the third largest export market for the US and during the first seven months of this year US exports to 皇冠体育app surged by 36.2 percent year-on-year, 15 percentage points higher than that for its imports from 皇冠体育app during the same period, the Ministry of Commerce said.
The US call for yuan revaluation will only bring them "political benefits, rather than create more jobs as promised", American economists and business groups have said.
The focus of the two-day hearings of the House Ways and Means Committee is to classify an undervalued currency as an illegal subsidy and thus allow protectionist measures against the supposed subsidy in the form of countervailing duties (CVD) or something similar. But, "this ostensible logic fails at every step", said Derek Scissors, an economist with the Asian Studies Center at The Heritage Foundation.
He said undervaluation is not a factor in the US trade deficit with 皇冠体育app and there is very little evidence the yuan's exchange rate costs the US a large number of jobs.
"The immediate problem with such a proposal is that even the loudest proponents of CVD cannot determine the exact amount of undervaluation of the yuan and therefore cannot properly set the size of CVD in this case," Scissors said.
Philip Levy, resident scholar at the American Enterprise Institute for Public Policy Research, agreed that the trade deficit with 皇冠体育app is "not the driving force" of US unemployment and the currency issue has "no economic meaning but has a lot of political significance".
Linda Menghetti, vice-president of the Emergency Committee for American Trade, said she opposed the Congress committee's action on behalf of business leaders in the manufacturing, financial, processing, merchandising, and publishing sectors. Many US legislators are pushing for a vote on a 皇冠体育app currency bill.
"Congress passing such legislation will turn the world's eyes to the US as a unilateralist in the picture and all the attention we are trying to get multilaterally on 皇冠体育app will evaporate to some extent," she said.
"皇冠体育app is ...the only market on which we can depend to help us double exports," she said. "It (any legislation) will take the oxygen out of the US-皇冠体育app commercial relationship."
Tan Yingzi reported from Washington. Xin Zhiming in Beijing contributed to this story.
