Tuesday 9 February 2010


U.S. CURRENCY BELLIGERENCE MAY BE COUNTERPRODUCTIVE

China RealTime Report, February 9, 2010

It may seem like the stars are aligning for China to let its currency rise, but recent tough talk from the U.S. may make such a move less, rather than more, likely.

U.S. President Barack Obama’s talk last week of monitoring exchange-rate policies may be welcome in Washington, but counterproductive in Beijing. Rather than encourage China to let the yuan, or renminbi, rise against the U.S. dollar, Obama’s tough stance may discourage China from budging, especially when ties with the U.S. are worsening over Google, Taiwan and Tibet.

As Credit Suisse economist Tao Dong put it Friday in a research note, “movement in the RMB exchange ultimately is a political decision, and the Chinese leaders will want to avoid being seen domestically as bowing to foreign pressure.” ING Financial Markets economist Tim Condon said Thursday the government “tends to freeze economic policies when political tension increases, which we think reduces the likelihood of any move on the renminbi in the current environment of elevated US-China political tension.”

The reasons for exiting the policy of keeping the yuan steady versus the U.S. dollar–one in place since July 2008–have become more solid in the past few months: Exports rose in December from a year earlier, after dropping for 13 months, and likely rose further last month; economic growth soared above 10% in the last three months of last year; and Beijing still wants to rely more on domestic demand for growth, which an appreciation of the yuan would encourage.

(...) [artículo aquí]

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