Ill-intentioned exchange rate game causes trouble to the world

China Plus Published: 2019-08-09 22:33:16
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Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".

The move by the U.S. Treasury Department to label China a currency manipulator violates multinational rules and undermines the global consensus. This irresponsible and ill-intentioned behavior will cause trouble for the world, and backfire on the United States.

[Photo: IC]

[Photo: IC]

Global growth is under increasing pressure due to rising unilateralism and protectionism. The United States and China, the world's top two economic powerhouses and major value chain centers, account for 40 percent of the world's GDP. The global outlook is closely linked with how the economic and trade relationship fares between these two countries. The trade tensions sparked by the United States last year damaged two-way trade and economic cooperation between the two countries and severely impacted global investment and consumption. Washington's move to designate China a currency manipulator, despite China not meeting the criteria for currency manipulation set by the U.S. Treasury Department in 2016, will further sour bilateral ties, trigger turbulence on the global financial market, and severely hinder international trade and economic growth.

The big appreciation of the Japanese yen in the 1980s led to that country's economic stagnation, and the free fall of the Argentine peso last year was a big blow to the credibility of Buenos Aires. These lessons show that massive currency fluctuations have a significant impact on a country's economy.

Recent figures show that gains in non-farm payrolls in the United States were lower in July than in June, and the non-manufacturing activity index fell from 55.1 to 53.7, notably short of the expected reading of 55.5. As the Wall Street Journal pointed out, "the trade war has now become a currency war, which raises the potential economic harm to another level." It went on to say that the currency convulsion puts growth in the United States in jeopardy by unleashing trade and currency risks that undermine the benefits of President Trump's tax reforms and deregulation. As the former U.S. Treasury Secretary Lawrence Summers pointed out, the move to label China a currency manipulator is unjustified, and it will damage the credibility of the United States government.

An increasing number of American economists along with other analysts are pointing to the recent fluctuations in China's currency as being normal market responses to Washington's threat to impose new tariffs on China, rather than evidence of currency manipulation.

By labeling China a currency manipulator, Washington is looking to create excuses to impose further tariffs on imports from China and to press the Federal Reserve for further interest rate cuts. This might serve the Trump administration's domestic political needs, but it could backfire. A stronger yuan, which Washington wants, will reduce the profit margins of American importers. That will lead to lower profits for importers, or higher prices for American consumers.

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LU Xiankun Professor LU Xiankun is Managing Director of LEDECO Geneva and Associate Partner of IDEAS Centre Geneva. He is Emeritus Professor of China Institute for WTO Studies of the University of International Business and Economics (UIBE) and Wuhan University (WHU) of China and visiting professor or senior research fellow of some other universities and think tanks in China and Europe. He also sits in management of some international business associations and companies, including as Senior Vice President of Shenzhen UEB Technology LTD., a leading e-commerce company of China. Previously, Mr. LU was senior official of Chinese Ministry of Commerce and senior diplomat posted in Europe, including in Geneva as Counsellor and Head of Division of the Permanent Mission of China to the WTO and in Brussels as Commercial Secretary of the Permanent Mission of China to the EU. Benjamin Cavender Benjamin Cavender is a Shanghai based consultant with more than 11 years of experience helping companies understand consumer behavior and develop go to market strategies for China. He is a frequent speaker on economic and consumer trends in China and is often featured on CNBC, Bloomberg, and Channel News Asia. Sara Hsu Sara Hsu is an associate professor from the State University of New York at New Paltz. She is a regular commentator on Chinese economy. Xu Qinduo Xu Qinduo is CRI's former chief correspondent to Washington DC, the United States. He works as the producer, host and commentator for TODAY, a flagship talk show on current affairs. Mr. Xu contributes regularly to English-language newspapers including Shenzhen Daily and Global Times as well as Chinese-language radio and TV services. Lin Shaowen A radio person, Mr. Lin Shaowen is strongly interested in international relations and Chinese politics. As China is quite often misunderstood in the rest of the world, he feels the need to better present the true picture of the country, the policies and meanings. So he talks a lot and is often seen debating. Then friends find a critical Lin Shaowen criticizing and criticized. George N. Tzogopoulos Dr George N. Tzogopoulos is an expert in media and politics/international relations as well as Chinese affairs. He is Senior Research Fellow at the Centre International de Européenne (CIFE) and Visiting Lecturer at the European Institute affiliated with it and is teaching international relations at the Department of Law of the Democritus University of Thrace. George is the author of two books: US Foreign Policy in the European Media: Framing the Rise and Fall of Neoconservatism (IB TAURIS) and The Greek Crisis in the Media: Stereotyping in the International Press (Ashgate) as well as the founder of, an institutional partner of CRI Greek. David Morris David Morris is the Pacific Islands Trade and Investment Commissioner in China, a former Australian diplomat and senior political adviser. Harvey Dzodin After a distinguished career in the US government and American media Dr. Harvey Dzodin is now a Beijing-based freelance columnist for several media outlets. While living in Beijing, he has published over 200 columns with an emphasis on arts, culture and the Belt & Road initiative. He is also a sought-after speaker and advisor in China and abroad. He currently serves as Nonresident Research Fellow of the think tank Center for China and Globalization and Senior Advisor of Tsinghua University National Image Research Center specializing in city branding. Dr. Dzodin was a political appointee of President Jimmy Carter and served as lawyer to a presidential commission. Upon the nomination of the White House and the US State Department he served at the United Nations Office in Vienna, Austria. He was Director and Vice President of the ABC Television in New York for more than two decades.