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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: TH	10/3/2004 5:57:12 PM
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Even the first-ever face-to-face talks between Chinese officials and the G-7 did not lead to a breakthrough. Treasury Secretary John Snow said he wanted China to move towards greater flexibility "as soon as possible. See full story. China has fixed its currency at roughly 8.3 yuan to the dollar since 1994, and the peg has become a politically sensitive topic in this election year. U.S. manufacturers and labor leaders complain the fixed exchange rate provides an unfair cost advantage to China's exporters and has been responsible for many of the millions of jobs lost over the past three years. In a speech Sunday at the conclusion of the negotiations, the number two official at the People's Bank of China said global imbalances were due to the low U.S. savings rate -- not China's currency. In a sharp rebuke to members of Congress seeing to force China to revalue its currency by seeking to force the issue with the World Trade Organization, Li Ruogu, the assistant governor of the People's Bank of China, suggested that the effort was similar to killing the goose that lays golden eggs. "I don't think it is in the U.S. interest to bring the issue to a high profile," he said. Li said that China only earns a small profit from U.S. manufacturers locating in China, and said the bulk of the profits were earned "by U.S. investors, U.S. distributors, U.S. markets and U.S. consumers." "So I really don't see any help if you force China to change the exchange rate and help the U.S. economy. You are exercising something to destroy the goose that can give you golden eggs," Li said. More marketwatch.com GT/TH

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