China says screw Barack Obama's call to change yuan policy

via BBC

China has hit back at comments by US President Barack Obama that Beijing should change its currency strategy.

On Thursday, he urged China to adopt a “market-oriented” exchange rate policy, increasing the pressure on Beijing to allow the yuan to appreciate.

But Su Ning, vice governor of the People’s Bank of China, accused Mr Obama of “politicising” the yuan issue.

According to news reports from Beijing, Mr Ning said that Mr Obama wants China to solve America’s problems.

“We don’t agree with politicising the renminbi [yuan] exchange rate issue,” Mr Su said on the sidelines of China’s annual session of parliament.

“We also don’t agree with a country taking its own problems and having another country solve them,” he said. China has always regarded currency issues as an internal matter.

Mr Obama had urged China to change its currency strategy to help re-balance the global economy.

In a speech in Washington, Mr Obama said China should move to a “more market-based exchange rate” so that US exporters are not disadvantaged.

US manufacturers have complained that the yuan is being kept artificially low, making US exports to China dearer.

‘Essential contribution’

“For too long, America served as the consumer engine for the entire world. But we are rebalancing. We’re saving more. We all need to rebalance,” Mr Obama said.

Currently, developing countries such as China and India export more to developed economies than they import.

In China’s case, this trend is supported by the low value of the yuan, which makes Chinese exports cheaper while rendering foreign imports more expensive.

Freeing up the exchange rate would effectively raise the value of the yuan and benefit US exporters.

“Countries with external deficits need to save and export more. Countries with external surpluses need to boost consumption and domestic demand,” Mr Obama added.

“As I’ve said before, China moving to a more market-oriented exchange rate would make an essential contribution to that global rebalancing effort.”

Currency manipulator?

Big business in the US has told Mr Obama to get tougher with China on trade and currency issues.

In his speech to the Import-Export Bank’s annual conference, Mr Obama said that “at a time when millions of Americans are out of work, boosting our exports is a short-term imperative”.

“When other markets are growing, and other nations are competing, we need to get even better. We need to secure our companies a level playing field,” he said.

US-China relations have soured recently, largely over Mr Obama’s meeting last month with the Tibetan spiritual leader, the Dalai Lama, and over arms sales to Taiwan.

And relations could be about to worsen. The US Treasury Department is considering whether to label China a “currency manipulator” in a report due on 15 April.

Last Saturday, China’s central bank released a statement pledging to keep the country’s currency stable throughout 2010.

Beijing fears that a change in its exchange rate will slow economic growth. Chinese exports fell 16% last year.