皇冠体育app

OPINION> Columnist
Sino-U.S. trade war unlikely to occur
By Li Hongmei (chinadaily.com.cn)
Updated: 2009-02-02 11:16

It seems that there are ample reasons to predict a trade war between 皇冠体育app and the U.S. following power reshuffle in Washington, as both the Democratic president Barack Obama and his Secretary of State Hillary Clinton pledged a tough line on 皇冠体育app during the campaign.

Last week, The U.S. Treasury Secretary Tim Geithner, accused 皇冠体育app of 鈥榤anipulating鈥� the yuan for economic gains, which Premier Wen Jiabao brushed aside on his unfolding European tour pointing 皇冠体育app鈥檚 present exchange rate policies are appropriate for the world economy.

As a matter of fact, since 皇冠体育app adopted a managed exchange rate system in 2005, the RMB has risen by 20 percent against the dollar. 鈥楾o maintain the stability of the Chinese currency on a reasonable and balanced basis at this moment will play a positive role in stabilizing international finance and the economy,鈥� Premier Wen said.

EU officials said they regarded the need to boost Chinese domestic demand as more important than the exchange rate issue, and they drew some comfort from Premier Wen鈥檚 promise that 皇冠体育app would 鈥榙evelop and improve鈥� a $ 585 billion fiscal stimulus that it announced last November.

Many international analysts also regarded Geithner鈥檚 unsubstantiated criticism at 皇冠体育app on the exchange rate issue as 鈥榓 shot across the bow鈥�, merely boding ill for Sino-American relations, which is deemed 鈥榗omplicated but vital.鈥� Perhaps Geithner鈥檚 strong 鈥榳arning鈥� carried a hidden message that the new administration would be tough on 皇冠体育app on trade issues. But at a time when the U.S. is struggling to weather its worst economic crisis in 26 years, and when Obama administration needs money to jumpstart the economy, the last thing for the U.S. to do may be to start a trade war with 皇冠体育app, the largest buyer of U.S. treasury bonds and other government-backed debt.

皇冠体育app saw a foreign reserve growth only in recent years, mainly pushed by its trade surplus and investment from other countries. Due to its ever-increasing economic openness to the outside world, 皇冠体育app has been considered by foreign enterprises as an ideal investment haven. Consequently, the export by 皇冠体育app-based foreign enterprises takes the lion鈥檚 share of the country鈥檚 total export volume.

With the enormous foreign reserves in hand, but without any better options for investment, 皇冠体育app had to turn to buying U.S. treasury bonds. However, such investment has brought 皇冠体育app almost a zero return as the Federal Reserves continuously lowered interests rates for the sake of economic stimulation. Needless to say, the inflow of foreign capital has greatly spurred 皇冠体育app鈥檚 economy at certain times, and meanwhile, 皇冠体育app鈥檚 huge foreign reserve investment has also provided the U.S. economy with its desperately needed fund resources. But owing to its defective financial monitoring mechanisms, the enormous amount of fund from 皇冠体育app proved to have been misused.

To shirk their own responsibilities, some politicians in Washington recently claimed the emerging economies including 皇冠体育app should be held accountable for the ongoing global financial crisis, which is not only groundless but more like a policy of finding scapegoat, and which would dampen Asian nations鈥� enthusiasm to continue to buy U.S. national debt.

Considering the facts as follows-- 皇冠体育app is America鈥檚 largest creditor, holding one-tenth of U.S. debt鈥擴S$ 11 trillion. Washington also needs Beijing鈥檚 cooperation to solve a number of pressing world issues. Likewise, Beijing needs American consumers for exports and GDP growth, which stood at 10 percent in 2008 despite the global economic slump-- an imminent trade war between the world鈥檚 largest and third-largest economies is highly unlikely.

It was reported that President Obama called President Hu Jintao over the weekend to express his hope for maintaining 鈥榮trong, constructive鈥� relations, and for closer cooperation in dealing with pressing world issues. In view of the circumstances and the national interests respectively, war of words may persist, but Sino-U.S trade war is very unlikely to occur at the time.