President Barack Obama devoted a two-hour meeting with Chinese officials on Thursday to pushing for China to revalue its currency. Chinese currency manipulation has been a cause for concern and high priority for much of Obama's presidency. Treasury Secretary Timothy Geithner recently discussed the role of Chinese currency policy in U.S. struggles for economic recovery. Analysts saw cause for optimism in May that China would reform the contentious policies, but they have since loosened only slightly. Will Obama's latest push make any difference?
Chinese Business Lobbies Resist Reform The Washington Post's John Pomfret writes, "It used to be that Chinese officials complained about the Byzantine decision-making process in the United States. Today, from Washington to Tokyo, the talk is about how difficult it is to contend with the explosion of special interests shaping China's worldview. ... Throughout this year, officials from the Ministry of Commerce, who represent China's exporters, have lobbied vociferously against revaluing China's currency, the yuan, despite calls to the contrary from the People's Bank of China and the Ministry of Finance."
- Congress Ready to Retaliate Yahoo News's Paul Eckert and Steve Holland report, "The talks between Obama and Wen came as U.S. lawmakers appeared to move closer than ever to acting on long-standing threats to pass legislation that would penalize China for keeping its currency artificially weak. ... The slow appreciation of the yuan makes it an easy target for U.S. politicians eager to address high unemployment in an election year. ... A U.S. House of Representatives committee has scheduled a vote for Friday on a China currency bill that would treat China's 'undervalued' currency as an export subsidy, and allow the U.S. Commerce Department to impose countervailing duties on Chinese products to offset the undervaluation."
- For Obama, Eye on Domestic Issues The New York Times' David Sanger contextualizes, "The unusual focus on this single issue at such a high level was clearly an effort by the White House to make the case that Mr. Obama was putting American jobs and competitiveness at the top of the agenda in a relationship that has endured strains in recent weeks on everything from territorial disputes to sanctions against Iran and North Korea."
- China's Internal Debate on Reform The Economist evaluates, "Slowly, however, China seems to be changing its approach. As a result of reforms begun last year, exporters to China can now price their goods in yuan, rather than dollars, and deposit the proceeds in offshore corporate accounts, mostly in Hong Kong. At first the reforms were a flop, says one banker. Few accounts were opened and not much business done. ... If global trade in yuan does swell, international banks have a good chance of developing other fee-generating, predictable businesses, such as handling letters of credit or payments. And since money on its way from one place to another inevitably pauses, there should be more rises in deposits, which become the stuff of loans. And yet, for all the financial logic, there is a huge argument going on within the Chinese government about whether to proceed. If foreigners sell their dollars to hold yuan instead they will put upward pressure on the currency, making it harder to 'manage' (to use the word China prefers) or 'manipulate' (to use the word preferred by its critics)."
- U.S.-Sino 'Spat' Won't Escalate Caixin Online's Andy Xie writes, "The pressure seems to be working - a bit. The yuan has been posting new highs against the dollar, although for the most part only to the second decimal. As a result, the U.S. side is still unhappy and Congress, reflecting its displeasure, soon might pass a major protectionist bill that disrupts bilateral trade. The currency market has not taken this spat seriously. For months, the yuan non-deliverable forwards market hardly budged, and no significant appreciation for the yuan has been predicted. ... Let me tell you what I think will happen: Before the U.S. mid-term elections in November, I think the House of Representatives will pass a bill that that could disrupt trade. But after the election, the Senate won't ratify it. Meanwhile, other measures may be taken that block some Chinese exports, mainly commodities still made in the United States that are of little importance to major U.S. companies such as steel, chemicals and solar panels."