China: Don't even think about yuan
World's most populous nation warns the U.S. and other G7 members not to meddle with its currency.
September 19, 2003: 3:08 PM EDT
DUBAI (Reuters) - China warned the United States Friday not to make it a scapegoat for its economic woes by pressing for a revaluation of the yuan at this weekend's meeting of the world's leading industrial powers.
As speculation swirled that Group of Seven finance ministers would call for market forces to play a greater role in setting exchange rates, traders put aside fears of intervention by the Bank of Japan (BOJ) and drove the yen up to a 2-1/2 year peak.
Whether China, Japan and other Asian nations should stop meddling in the foreign exchange market and let their currencies float higher to help iron out major imbalances threatening the global economy will dominate Saturday's G7 gathering in Dubai.
With an eye on the U.S. presidential election in November 2004, Washington in particular has been cajoling Beijing to act to deflect pressure from U.S. manufacturers who blame job losses on what they say is an unfairly undervalued Chinese currency.
But the China Daily, in a commentary seen as reflecting the views of the government, dismissed repeated U.S. calls for a stronger yuan, also known as the renminbi, as futile.
"Making China the scapegoat can perhaps help some U.S. politicians score cheap political points, (but) it has nothing to do with the solution of their real problems," the article said.
Blind eye
In contrast to its pressure on China, Washington has turned a blind eye so far this year to record selling of yen by the BOJ worth about $80 billion to avert a rise in the yen that could kill an unfolding recovery in Japan's export-dependent economy.
Until this week, that intervention had kept the dollar above ¥115, widely deemed to be a make-or-break level for the profitability of many Japanese exporters.
But on Friday traders summoned up the confidence to test the BOJ's resolve and, finding it wanting, swiftly pushed the dollar down to a low of ¥113.60. It later recovered to ¥113.85.
BOJ Governor Toshihiko Fukui played down talk that, since Japan's economy grew at a brisk 3.9 percent clip between April and June, Tokyo would come under pressure to let the yen rise.
Cheap Chinese imports cap inflation and make American paychecks go further, but that is less important politically for President Bush in an election year than a vibrant global economy generating demand for U.S. goods.
To that end, U.S. Treasury Secretary John Snow chided other G7 members on Friday for not pulling their weight.
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Snow said European economies were "stagnant basically" and that Japan had gone through "10 years of very anaemic growth." In contrast, the United States was entering what he called a period of sustained and long-term growth.
"The United States can't be the only engine of growth," Snow said in Islamabad before flying to Dubai.
Not all G7 ministers will attend Saturday's meeting.
France's Francis Mer is staying home to focus on future of ailing engineering firm Alstom, while Japan's Masajuro Shiokawa, is ill. The other members are the United States, Germany, Britain, Italy and Canada.
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