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Daniel W. Drezner
Pressuring China on the renminbi: it’s not just for developed countries anymore
Two nights ago I recorded a podcast with the American Chamber of Commerce in China, which you can listen to if you have no outside life whatsoever are so interested. In the podcast, I repeated my mantra about mounting multilateral pressure on China to revalue the yuan. This week, in the run-up to the G-20 finance ...
Two nights ago I recorded a podcast with the American Chamber of Commerce in China, which you can listen to if you
have no outside life whatsoever are so interested.
In the podcast, I repeated my mantra about mounting multilateral pressure on China to revalue the yuan. This week, in the run-up to the G-20 finance ministers meeting this week, Bloomberg reports that the other BRIC economies are now starting to vent on the issue,
Central bank governors in India and Brazil backed a stronger Chinese yuan, siding with U.S. President Barack Obama before a meeting of the Group of 20 nations this week.
Exports from China to India have grown faster than Indian shipments to its northern neighbor “and that obviously is a reflection of differences in the exchange-rate management,” Reserve Bank of India’s Duvvuri Subbarao told reporters in Mumbai yesterday. Brazil’s Henrique Meirelles told a senate hearing yesterday in Brasilia it was “absolutely critical” that China should let its currency appreciate.
Obama, who considers the yuan “undervalued,” is seeking to gain broader support from finance officials of the G20, who will discuss outlook for the global economy in Washington for three days starting April 22. Speculation that China may scrap the yuan’s peg to the dollar intensified this month after Treasury Secretary Timothy F. Geithner delayed a report that could brand the nation a currency manipulator.
“This meeting will be the first test by the U.S. to use a multilateral forum to press China into action on its currency,” Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd. wrote in a research note yesterday.
The discussions will include a range of topics including currencies and a communiqué will be released on April 23, a U.S. Treasury Department official, who declined to be identified, said yesterday.
The Financial Times’ Geoff Dyer follows up:
China is facing growing pressure from other developing countries to begin appreciating its currency, providing unexpected allies for the US in the diplomatic tussle over Beijing’s exchange rate policy….
Lee Hsien Loong, prime minister of Singapore, added his country’s voice to the debate last week, saying it was “in China’s own interests” with the financial crisis over to have a more flexible exchange rate.
Some in China have fended off US pressure for a stronger currency, describing it as a distraction from the real causes of the financial crisis. However, criticism from developing countries is not so easy to bat away. “If the rich and emerging economies are united in asking China to revalue, it would be harder to dismiss the request as an example of superpower arrogance,” said Sebastian Mallaby at the Council on Foreign Relations.
Mallaby’s argument sure sounds familiar.