IT IS NOT GOOD FOR each other .
In 2010, the pressure for action on the renminbi began early in the year, when President Obama spoke harshly in February about China’s economic policies, stopping short of saying that China manipulates its currency. The following month, 130 members of Congress sent a letter to Treasury Secretary Geithner, demanding that the Obama administration designate China as a currency manipulator in a report due to Congress in April. A bipartisan group of senators introduced a bill aimed to force the administration’s hand, by making it easier to impose retaliatory trade barriers against Chinese goods. And the World Bank issued a report calling the renminbi overvalued.
Economists agree with that assessment. They said at the time that the Chinese currency was undervalued by 25 to 40 percent compared with the dollar and other currencies, and that the imbalance was hurting not only the United States but economies around the world, including the European Union, Brazil and India. Mr. Obama has held repeated conversations with President Hu Jintao since 2009.
The Chinese government has denied that the currency is overvalued or manipulated, and Prime Minister Wen Jiabao rejected American complaints as “a kind of trade protectionism,” making no plans for reform.
In June, China announced that it would allow greater flexibility in the value of its currency. But by September the renminbi had risen less than 2 percent against the dollar and actually fallen slightly against the trade-weighted averages of its trading partners’ currencies. Mr. Geithner went before Congress to urge China to allow “significant, sustained appreciation” of its undervalued currency; senators of both parties called for tougher measures.
During the annual gathering of heads of states at the United Nations in September, Mr. Obama devoted most of a two-hour meeting with China’s prime minister, Wen Jiabao, to the issue. In October, the head of the International Monetary Fund urged China to allow its currency to rise in value. And at the Group of 20 summit in South Korea in November, a meeting that revolved around trade and currency disputes, Mr. Obama used his sharpest language yet, stating bluntly that the renminbi “is undervalued. And China spends enormous amounts of money intervening in the market to keep it undervalued.”
By early 2011, it also appeared to many economists that the effort to keep the renminbi low was feeding China’s growing problems with inflation.
The central bank had been pumping out currency at an ever-accelerating pace over the past decade to limit the renminbi’s appreciation against the dollar. That strategy helped preserve a competitive advantage of Chinese exporters by keeping their prices relatively low on global markets — while also protecting the jobs of tens of millions of Chinese workers in export factories
In 2010, the pressure for action on the renminbi began early in the year, when President Obama spoke harshly in February about China’s economic policies, stopping short of saying that China manipulates its currency. The following month, 130 members of Congress sent a letter to Treasury Secretary Geithner, demanding that the Obama administration designate China as a currency manipulator in a report due to Congress in April. A bipartisan group of senators introduced a bill aimed to force the administration’s hand, by making it easier to impose retaliatory trade barriers against Chinese goods. And the World Bank issued a report calling the renminbi overvalued.
Economists agree with that assessment. They said at the time that the Chinese currency was undervalued by 25 to 40 percent compared with the dollar and other currencies, and that the imbalance was hurting not only the United States but economies around the world, including the European Union, Brazil and India. Mr. Obama has held repeated conversations with President Hu Jintao since 2009.
The Chinese government has denied that the currency is overvalued or manipulated, and Prime Minister Wen Jiabao rejected American complaints as “a kind of trade protectionism,” making no plans for reform.
In June, China announced that it would allow greater flexibility in the value of its currency. But by September the renminbi had risen less than 2 percent against the dollar and actually fallen slightly against the trade-weighted averages of its trading partners’ currencies. Mr. Geithner went before Congress to urge China to allow “significant, sustained appreciation” of its undervalued currency; senators of both parties called for tougher measures.
During the annual gathering of heads of states at the United Nations in September, Mr. Obama devoted most of a two-hour meeting with China’s prime minister, Wen Jiabao, to the issue. In October, the head of the International Monetary Fund urged China to allow its currency to rise in value. And at the Group of 20 summit in South Korea in November, a meeting that revolved around trade and currency disputes, Mr. Obama used his sharpest language yet, stating bluntly that the renminbi “is undervalued. And China spends enormous amounts of money intervening in the market to keep it undervalued.”
By early 2011, it also appeared to many economists that the effort to keep the renminbi low was feeding China’s growing problems with inflation.
The central bank had been pumping out currency at an ever-accelerating pace over the past decade to limit the renminbi’s appreciation against the dollar. That strategy helped preserve a competitive advantage of Chinese exporters by keeping their prices relatively low on global markets — while also protecting the jobs of tens of millions of Chinese workers in export factories
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