China Rejects Currency Calls

Chinese Premier Wen Jiabao has rejected international calls for the Chinese currency to appreciate. Many American economists and members of Congress complain that an undervalued currency gives Chinese exports an unfair advantage and makes other countries' exports relatively more expensive, slowing economic growth in the U.S. and elsewhere.

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Pressure is building on the Obama administration to take action against China and its currency policies. Many U.S. lawmakers argue that China undervalues its currency, giving its exports an unfair advantage. So they're calling for punitive tariffs.

But as NPR's Anthony Kuhn reports from Beijing, the Chinese government is under strong political pressure not to cave-in to foreign demands.

ANTHONY KUHN: He may be the head of the Chinese government, but Premier Wen Jiabao stuck to his official talking points much like a lowly ministry spokesman.

At his annual appearance before the press yesterday, Wen stuck to the message that no country will browbeat China into devaluing its currency, the renminbi or RMB.

Premier WEN JIANBAO (China): (Through translator) We are opposed to the practice of engaging in mutual finger-pointing among countries or taking strong measures to force other countries to appreciate their currencies, because this kind of practice is not in the interest of the reform of RMB exchange rate regime.

KUHN: Wen said that the Renminbi was fairly valued and would fluctuate very little this year. What Wen did not say is that many Chinese economists and officials agree that letting their currency appreciate is only a matter of time.

Shang-Jin Wei is director of the Chazen Institute of International Business at Columbia University in New York. He says that speculators are buying up Chinese currency, betting that it will appreciate. The money they pump into China is fueling inflation.

Mr. SHANG-JIN WEI (Director, Chazen Institute of International Business, Columbia University): I think China is sensing that increasing risk is looming large and that government will soon see a connection between the difficulty in controlling inflation and current policy of tagging the RMB to U.S. dollar.

KUHN: China unpegged its currency from the dollar in 2005 but repegged it last year to keep its export sector afloat. Earlier this month, Central Bank governor Zhou Xiaochuan suggested that China would unpeg its currency and let it appreciate after the recession eased.

But as in recent disputes with the U.S. over Tibet and Taiwan, Chinese public opinion has prompted Beijing to take a more defiant tone. Shang-Jin Wei says many Chinese approved of Wen's comments on the currency issue.

Mr. WEI: People thought that he's able to stand up to international pressure for Chinese interest. Whether it's true or not is the question, but as a politician, he obviously wins points.

KUHN: With China refusing to budge and the U.S. headed for midterm elections, the currency dispute seems likely to escalate. Today, 130 members of Congress wrote to Treasury secretary Timothy Geithner and Commerce secretary Gary Locke, urging them to hit Chinese exports with punitive tariffs.

Alan Romberg is a China expert at the Stimson Center, a Washington, D.C.-based think tank. He cautions that lawmakers have constituents on both sides of this issue.

Mr. ALAN ROMBERG (China Expert, Stimson Center): I doubt that there are more than a handful of members of Congress, if not many, who have only one-sided interest from their constituents on this issue. In other words, some will benefit and some will be harmed by tougher measures toward China.

KUHN: The issue will come before the Treasury Department on April 15th, by which time it has to decide whether or not to classify China as a currency manipulator, a label which could give China's critics more ammunition.

Anthony Kuhn, NPR News, Beijing.

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