US Businessmen Oppose Rapid Forex Policy Change In China
Sunday, October 19, 2003 04:23 PM
BANGKOK (Dow Jones)--Top U.S. businessmen and economists Sunday criticized the U.S. stance on China's foreign exchange policy warning that a rapid revaluation of the Chinese currency could hurt economic stability and business interests in the region.
Attendants at a business gathering on the sidelines of an Asia-Pacific Economic Cooperation summit called instead for stability in the rules of the game.
David Hale, economist and chairman of Hale Advisers, and Lyric Hughes Hale, publisher of www.chinaonline.com, told a panel discussion that a major economic crisis loomed if the U.S. jobs market failed to recover next year and the U.S. administration continued to push for a revaluation of the yuan.
"If we can get back on reasonable growth over the next three-four months, the pressure on China (on foreign exchange) will fade," Hale said. "But if we fail adding 100,000 jobs a month, early next year ... there is risk of a great, great global crisis."
Just ahead of a meeting with U.S. President George Bush, Chinese President Hu Jintao Sunday rebuffed U.S. calls on China to relax its foreign exchange policy and allow, its currency, the yuan, to appreciate. Hu argued that a stable currency policy is favoring not just China but the whole world.
U.S. officials claim that the yuan is being artificially kept undervalued, therefore creating unfair competition for U.S. exports and largely contributing to the country's ballooning trade deficit.
Hale, who last month testified in a U.S. Congress committee on China's booming trade with the U.S., said that China and other countries in the region have been financing the U.S. deficit though their $1.7 trillion worth of foreign reserves. He noted that China, alone, last year bought $100 billion worth of U.S. debt.
"If we continue this currency discussion we could jeopardize these capital flows," he said.
U.S. corporate executives operating in China were also critical of U.S. policy and favored a slow change in the currency regime.
Frederick Henderson, Asia Pacific president and group vice president of General Motors Corp. (GM, news) told another panel that as a global automotive player, the company can operate in any exchange rate regime - fixed or floated. What can be problem in business is "rapid disruption" in foreign exchange rates, he said.
"What we really look at, is predictability and having some sense, (of the exchange rate policy) so we can plan for our business," Henderson said.
Thomas Donohue, chairman of the U.S. Chamber of Commerce, expressed concern over the impact it would have on the world economy if the U.S. mandates China's foreign exchange policy.
He said pressure from unemployment in the U.S. has made China's exchange rate issue "more significant than it might be."
"We're suggesting to the president and our government that evolution is better than revolution," Donohue said.
-By Jenny Paris and Suttinee Yuvejwattana, Dow Jones Newswires; 662-266 0744; jenny.paris@dowjones.com
Dow Jones Newswires
10-19-03 1623ET
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