Perspectives on RMB & Trade

Related entries: Business Issues, Economy, General, News, Risk & Law, Trading

While the US continues to berate China for its management of the Renminbi (RMB) – the issue at the heart of bilateral trade disputes – the EU is taking a different approach.

The European Commission (which is not afraid of the bringing the odd dumping case, or slapping tariffs on Chinese goods) has given support to China’s strategy of gradual reform of the exchange rate mechanism. The reasoning is that any sudden re-valuation could have unwelcome economic consequences on the international markets:

    “An abrupt de-pegging of the renminbi, and possibly other Asian currencies, from the dollar could give rise to a sudden reversal of Asian capital flows into the U.S., which might risk an excessive additional downward movement of the dollar against the euro,” said the commission document, which was prepared for an April 6 meeting of European finance ministers in Vienna.”

On the wider issue of trade, a recent article in the People’s Daily shows that the Chinese government is not blind to the risks of the current structure of China’s international trade:

    ”Although exports continue to grow, manufacturing margins are low and accompanied by serious environmental pollution and a huge consumption of resources and energy.

    The rapid trade increase showed the imbalance between investment and consumption, said Wu Jinglian, a leading Chinese economist, who suggested the government should stimulate domestic consumption rather than depend heavily on exports.

    The Ministry of Commerce, on the other hand, calls on Chinese companies to encourage innovation and create self-owned brands to develop technology and profit rates, and to control quantity and avoid trade disputes.”

These things are never simple, and all sides have a different perspective based on national, or regional…or political self-interest.

See news sources:

    EU Backs China’s Gradual Yuan Moves, Splits With US (Update3)
    Bloomberg – USA
    April 3 (Bloomberg) — The European Commission backed China’s policy of switching to a more flexible exchange-rate system at its own pace, rebuffing US calls …
    http://www.bloomberg.com/apps/news?pid=10000085&sid=a89KdRHcqc4I&refer=europe

    China examines trade growth in face of international disputes
    People’s Daily Online – Beijing,China
    … the European Union announced an antidumping tax on Chinese shoes on March 23, the EU and the United States have filed a WTO complaint against China over auto …
    http://english.people.com.cn/200604/03/eng20060403_255546.html

    China vows to cut reliance on cheap exports in 5 years
    Financial Express – Bombay,India
    BEIJING, APRIL 3: China, under pressure from rising trade spats, will push changes in the next five years to cut labour-intensive exports, Xinhua news agency …
    See all stories on this topic

    Guy de Jonquières: China manufacturing myths
    By Guy de Jonquières
    Published: April 3 2006 20:23 | Last updated: April 3 2006 20:23
    http://news.ft.com/world/asiapacific/china

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