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<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Experts say the
Chinese currency is undervalued by up to 40 percent. "<st1:country-region
w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>'s policy
of keeping its currency, the renminbi, undervalued has become a significant
drag on global economic recovery. Something must be done," said Nobel
Prize-winning <st1:country-region w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region>
economist Paul Krugman. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Treasury
Secretary Timothy Giethner has to decide on the issue next month.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><st1:country-region w:st="on"><b><font size=4 color=navy
face="Trebuchet MS"><span style='font-size:14.0pt;font-family:"Trebuchet MS";
color:navy;font-weight:bold'>US</span></font></b></st1:country-region><b><font
size=4 color=navy face="Trebuchet MS"><span style='font-size:14.0pt;font-family:
"Trebuchet MS";color:navy;font-weight:bold'> currency battle with <st1:country-region
w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>
underscores global concerns<o:p></o:p></span></font></b></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>21 Mar 2010<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>http://economictimes.indiatimes.com/news/international-business/US-currency-battle-with-China-underscores-global-concerns/articleshow/5707768.cms<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'> <o:p></o:p></span></font></p>
<p class=MsoNormal><st1:State w:st="on"><font size=2 color=navy
face="Trebuchet MS"><span style='font-size:10.0pt;font-family:"Trebuchet MS";
color:navy'>WASHINGTON</span></font></st1:State><font size=2 color=navy
face="Trebuchet MS"><span style='font-size:10.0pt;font-family:"Trebuchet MS";
color:navy'>: By pushing <st1:country-region w:st="on">China</st1:country-region>
hard to revalue its currency, the <st1:country-region w:st="on">United States</st1:country-region>
may also be doing a favor for export-driven Asian and European nations reeling
from <st1:City w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:City>'s
exchange-rate policy. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Many of these
economies, like the <st1:country-region w:st="on">United States</st1:country-region>,
have long complained that a weak Chinese yuan currency has been giving <st1:country-region
w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region> an unfair
trade advantage at their expense. But unlike the <st1:country-region w:st="on"><st1:place
w:st="on">United States</st1:place></st1:country-region>, they have been less
aggressive in championing their cause. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>The Asian
nations are reluctant to anger their giant neighbor and growth driver, while
the European Union's trade deficit with <st1:country-region w:st="on">China</st1:country-region>
is not as alarming as that of the <st1:country-region w:st="on"><st1:place
w:st="on">US</st1:place></st1:country-region>. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>American
lawmakers last week introduced legislation to punish <st1:country-region w:st="on">China</st1:country-region>
with trade sanctions and demanded President Barack Obama label the Asian giant
a currency manipulator, a move that could trigger tougher action on <st1:City
w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:City>. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Treasury
Secretary Timothy Giethner, who has to decide on the issue next month, said the
yuan issue was a global problem and not confined to the <st1:country-region
w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region> alone. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>"It is a
very important issue, it is important for <st1:country-region w:st="on">China</st1:country-region>,
for all <st1:country-region w:st="on">China</st1:country-region>'s trading
parners, it is very important for the <st1:country-region w:st="on"><st1:place
w:st="on">United States</st1:place></st1:country-region>," he told the
Fox broadcasting network when asked about the currency legislation in Congress.
"It is not just an issue between <st1:country-region w:st="on">China</st1:country-region>
and the <st1:country-region w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region>
but for the world economy as a whole." <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>The <st1:country-region
w:st="on">US</st1:country-region> trade deficit with <st1:country-region w:st="on">China</st1:country-region>
soared to nearly 227 billion dollars in 2009, much larger than the total
deficit suffered by all <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>'s
major trading partners of 196.1 billion dollars in 2009. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><st1:country-region w:st="on"><font size=2 color=navy
face="Trebuchet MS"><span style='font-size:10.0pt;font-family:"Trebuchet MS";
color:navy'>China</span></font></st1:country-region><font size=2 color=navy
face="Trebuchet MS"><span style='font-size:10.0pt;font-family:"Trebuchet MS";
color:navy'> made its currency a little flexible in 2005 following <st1:country-region
w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region> pressure but
when the global financial crisis erupted in 2008, it repegged the yuan to the
US dollar to prop up Chinese exports and revive the economy. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Between 2005 and
2008, <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>
allowed the yuan to appreciate by about 20 percent against the dollar but
experts say the Chinese currency is undervalued by up to 40 percent. "<st1:country-region
w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>'s policy
of keeping its currency, the renminbi, undervalued has become a significant
drag on global economic recovery. Something must be done," said Nobel
Prize-winning <st1:country-region w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region>
economist Paul Krugman. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Global economic
growth would be about 1.5 percentage points higher if <st1:country-region
w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region> stopped
restraining the value of its currency and running trade surpluses that are
adding to its 2.4 trillion dollars hoard of reserves, he said. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>"This is
the most distortionary exchange-rate policy any major nation has ever followed.
And it's a policy that seriously damages the rest of the world," Krugman
added. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>The World Bank
and the International Monetary Fund also think the yuan needs to be stronger.
"The renminbi (yuan) is very much undervalued" and it is logical that
with the world economy regaining its balance "the renminbi will
appreciate," IMF managing director Dominique Strauss-Kahn said last week. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Chinese Premier
Wen Jiabao has vowed to resist any foreign pressure for a stronger yuan, saying
<st1:City w:st="on"><st1:place w:st="on">Beijing</st1:place></st1:City> made
"strong efforts" since the outbreak of the financial crisis to keep
the yuan at a "stable level." <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><st1:City w:st="on"><st1:place w:st="on"><font size=2
color=navy face="Trebuchet MS"><span style='font-size:10.0pt;font-family:
"Trebuchet MS";color:navy'>Beijing</span></font></st1:place></st1:City><font
size=2 color=navy face="Trebuchet MS"><span style='font-size:10.0pt;font-family:
"Trebuchet MS";color:navy'>'s rigid exchange-rate policy is also preventing
other Asian export-driven nations from allowing their currencies to appreciate
for fear of losing their export competitiveness to Chinese firms benefiting
from the yuan's government-enforced stability. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>"In the
short run, with capital pouring into emerging market countries, their ability
to respond to the threat of asset bubbles and overheating is undermined,"
said Arvind Subramaniam, an expert at the Washington-based Peterson Institute
for International Economics. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Emerging-market
countries such as <st1:country-region w:st="on">Brazil</st1:country-region>, <st1:country-region
w:st="on">India</st1:country-region> and <st1:country-region w:st="on"><st1:place
w:st="on">South Korea</st1:place></st1:country-region> "are loath to
allow their currencies to appreciate, to dampen overheating, when that of a
major trade rival is pegged to the dollar," he said. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>The EU trade
commissioner, Karel De Gucht, has also lashed out at what he said was a
"deliberate" policy by <st1:country-region w:st="on"><st1:place
w:st="on">China</st1:place></st1:country-region> of keeping its currency
undervalued. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>He warned in
January when he took up the post that <st1:country-region w:st="on"><st1:place
w:st="on">China</st1:place></st1:country-region>'s foreign-exchange stance
posed a "major problem" for global economic recovery and undercut
European exporters. <st1:country-region w:st="on">China</st1:country-region>
has overtaken <st1:country-region w:st="on"><st1:place w:st="on">Germany</st1:place></st1:country-region>
as the world's biggest exporter. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>The "real
victims" of <st1:country-region w:st="on">China</st1:country-region>'s
policy were other emerging-market and developing countries "because they
compete more closely with <st1:country-region w:st="on">China</st1:country-region>
than the <st1:country-region w:st="on">United States</st1:country-region> and
Europe, whose source of comparative advantage is very different from <st1:country-region
w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>'s,"
said Subramaniam at the Peterson Institute. <o:p></o:p></span></font></p>
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