China Tells

During Obama’s visit to Beijing, one of top priority topic that he will discuss with President Hu Jingtao is the exchange rate of RMB (See Article from WSJ). Due to the fact that RMB is pegged to USD, so claims Obama, it is artificially under valued and does not reflect the true PPP. Such an under valuation is one of the major causes for a global imbalance: China accumulates huge surplus and USA accumulates huge deficit (See Graph from Chinatells). To address such an imbalance, therefore, China government need to revalue RMB or loosen the peg. The counter argument from China government, however, is that how US can demand China to revalue its currency while US themselves are letting the USD slide in a free fall? It seems very unfair that US government is applying double standard to its own currency and someone else’s currency. I think it is a valid point from China government. However, there is a weakness in such policy: it upsets the other trading partners such as EU and Japan. By sticking RMB to USD, China government is right to say that it is a policy of stablizing the exchange rate; however in fact RMB has depreciated against JPY and EUR thanks to the depreciation of USD against almost all the currencies. Now, the question comes: US seems untouchable in determining their currency value and the rest of international community seems no choice but to accept it. Can China do the same? Or, another question is, even if China has the muscle to execute an exchange policy similar to US’, which is totally independent with government’s free will, is it the right time to pursue it?

奥巴马总统访问北京期间,人民币汇率成为中心议题之一.当前不仅美国,还有中国其它的贸易伙伴对人民币汇率颇有微词.由于人民币和美元汇率锁定,而最近一段时间美元跌的很厉害,因此人民币相对于其它货币也少不了贬值,这样无形之间增加了中国产品出口的竞争力并且削弱了其它国家的出口行业.在这个问题上,中央政府如何斗智斗勇化解矛盾将十分惹人注意.