Is a trade war about to brake out between the United States and the People’s Republic of China? U.S. talk of Chinese currency manipulation has raised hackles in Beijing, and they have responded. This article from China’s strictly-controlled China Daily might be summarized this way: “You [the U.S.] had better not start a trade war – but if you do, America will be hurt more than China will.” Or in the words of Deng Yuwen, the author of this article:
“China will not tolerate American intervention in its exchange rate policy-making, which is within the jurisdiction of the nation’s sovereignty. … As the largest American creditor, China is estimated to hold 35.4 percent of all U.S. government bonds. Even now, when its own economy is suffering severe hardship and a serious lack of fluidity, China has chosen to refrain from selling U.S. national debt. … the exclusion of Chinese products from the U.S. market wouldn’t severely impact the foundation of the Chinese economy, since the U.S. only accounts for 20 percent of the Chinese export volume. Meanwhile, China is trying to develop a more domestically-driven economy.”
By Deng Yuwen*
February 6, 2009
People’s Republic of China – China Daily – Original Article (English)
Just as the world desperately needs a concerted effort to tackle the escalating financial crisis, there is growing concern within the international community that China and the United States are about to enter a trade war.
In a Congressional hearing before he took office, U.S. Treasury Secretary Timothy Geithner accused China of currency manipulation. To calm official and academic refutations from the Chinese side, the White House later explained that its policy on China’s exchange rate is still being studied and yet to be confirmed.
But the tough stance by the new U.S. Treasury chief, whatever motivated it, heralds a potential escalation of long-standing economic frictions between the world’s two economic heavyweights.
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