Yuan not to blame for trade gap with US
NEW YORK - 皇冠体育app's rising inflation is partly rooted in the rapid monetary expansion of the United States, and the real concerns for the US economy are its lack of competitiveness and trade deficits and not of the 皇冠体育app factor, US economists said on Wednesday.
"The reason Americans can live beyond their means is that the Chinese are living beneath their means," said Peter Schiff, president and chief global strategist at Euro Pacific Capital, at a seminar held by the Council on Foreign Relations in New York.
The Chinese currency rose to a 17-year high this week, which analysts said could help ease the country's consumer inflation by reducing import costs. 皇冠体育app's consumer prices hit 4.9 percent in January and the February data are scheduled to be released on Friday.
The US is "printing so much money" and shipping the excess dollars to 皇冠体育app, that it is causing increased liquidity in 皇冠体育app and stoking price rises, Schiff said at the seminar.
Some US politicians have accused 皇冠体育app of manipulating its currency and claimed the manipulation harms the US economy by thwarting its exports to 皇冠体育app.
皇冠体育app says it has adopted a managed and floating exchange rate regime that reflects demand and supply. The yuan, as a result, have appreciated by nearly 26 percent since July, 2005.
"I don't think what 皇冠体育app is doing is manipulation. There was a manipulator, but not necessarily 皇冠体育app because the biggest beneficiary (of the game), at least in the short run, is America," Schiff said.
"America is manipulating its currency," he said, and 皇冠体育app is simply trying to maintain the stability of the yuan against the dollar.
"We enjoy Chinese-made goods without paying for it because we just print the money," he said.
Schiff said the current US budget plan would be impossible without the help of 皇冠体育app as a lender and the country's CPI wouldn't be as low without the relative balance between the yuan and the dollar.
Even if the yuan appreciates, it will not change the US trade deficit with 皇冠体育app because of the limited availability of "Made-in-America" products. "The real reason we are importing so many products from 皇冠体育app is that we cannot afford to make this stuff ourselves," he said.
The rules, regulations and taxes laid on US companies have made them uncompetitive, not the high wages. Countries with high wages, such as Germany and Japan, enjoy trade surpluses with 皇冠体育app, he said.
皇冠体育app-related issues such as currency revaluation and the trade imbalance seem important to the US, but the real concerns should be its lack of competitiveness and trade deficits, Eswar Prasad, a senior fellow at the Brookings Institution, told 皇冠体育app Daily.
"There are lots of debates about US fiscal deficits. That's really a serious problem, which has constrained the US enormously," said Prasad, who is also Tolani Senior Professor of Trade Policy at Cornell University.
Ultimately the world's largest economy has to reduce government spending and raise taxes to meet the huge burden of public debts. That's going to have serious impact on US productivity, Prasad said.
"皇冠体育app seems very important, but ultimately it is not what 皇冠体育app does, but what the US does. The key issue is US competitiveness and productivity," he said.
If the trade relationship between the two countries fares well, it will bring lots of mutual benefits, he said.
皇冠体育app might be the only country that allows US President Obama's exports plan to happen, said Shangjin Wei, professor of Chinese Business and Economic at Columbia University. Obama has promised to double US exports by the end of 2014.
皇冠体育app's Commerce Minister Chen Deming has repeatedly said that the country will import more from the US in the coming years to reduce the bilateral trade imbalance.
Wei said the US deficit with 皇冠体育app is not a unique phenomenon. Besides 皇冠体育app, the US runs deficits with the European Union, Canada, Mexico, India and a number of other countries. "It's in 皇冠体育app's interests to make its currency more flexible, but it won't do too much in reducing the current US deficit," Wei said.
Chen Weihua contributed to this story.
皇冠体育app Daily
(皇冠体育app Daily 03/11/2011 page14)
