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Obama vows to get tough with China on currency
Thu, Feb 4 09:16 AM
President Barack Obama vowed to "get much tougher" with China on trade rules, including currency rates, to ensure that U.S. goods do not face a competitive disadvantage.
With U.S.-Chinese relations under pressure over a host of issues, including U.S. arms sales to Taiwan and Obama's planned meeting with Tibet's spiritual leader, the Dalai Lama, Obama said his administration was pushing China and other countries to enforce trade rules and open their markets.
"The approach that we're taking is to try to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways," Obama told a meeting with Senate Democrats on Wednesday.
"One of the challenges that we've got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price."
But Obama insisted he would not take a protectionist stance toward China, the world's third-largest economy, warning that "to close ourselves off from that market would be a mistake".
Republican Senator Charles Grassley urged Obama to formally label China a currency manipulator to induce Beijing to raise the value of its yuan. Obama so far has resisted that step.
U.S. manufacturers have complained for years Beijing's currency policies give Chinese companies an unfair price advantage. China says exchange rate policy is an internal matter.
YUAN SEEN AS UNDERVALUED
The Peterson Institute for International Economics estimated China's yuan was undervalued by about 30 percent against all world currencies and about 40 percent against the dollar.
The Washington think-tank also said four other East Asian economies -- Hong Kong, Malaysia, Taiwan and Singapore -- needed to let their currencies rise in value.
Obama has twice declined to label China as a currency manipulator, which would escalate the issue to the World Trade Organisation, but faces a third decision on that issue in April.
Finance ministers and central bank governors of the Group of Seven rich nations will discuss China's currency this weekend in Canada, a U.S. Treasury official said.
"The Chinese currency issue is on everybody's mind. It's an issue for everybody," the official said.
Forward contracts for the yuan edged lower early on Thursday, showing the market expects pressure on China to allow the currency to appreciate could have the opposite effect.
One-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.6490 from 6.6410 bid late on Wednesday. A higher bid means lower implied yuan appreciation versus the dollar over the coming year.
The spate of disagreements have led markets to expect a hardening of China's position, making it less likely to accede to pressure to allow the yuan to gain.
"China is unlikely to make significant concessions to U.S. pressure on the yuan, in particular at the current time when the two countries are involved in a slew of disputes over issues including U.S. arms sales to Taiwan," said a Chinese state-owned bank dealer in Beijing, who asked not to be named.
"If the United States takes a tougher line on the yuan, it may prove to be counterproductive."
REVILED AS SEPARATIST
China on Wednesday warned Obama against meeting the Dalai Lama, reviled by Beijing as a separatist for seeking self-rule for Tibet. The meeting may happen as early as this month.
During a summit in Beijing in November, Chinese President Hu Jintao himself urged Obama not to meet the exiled Tibetan leader, said Ma Zhaoxu, a Chinese Foreign Ministry spokesman.
"We urge the U.S. to fully grasp the high sensitivity of the Tibetan issues, to prudently and appropriately deal with related matters, and avoid bringing further damage to China-U.S. relations," Ma said.
Beijing was already upset with Washington over a $6.4 billion U.S. weapons package for Taiwan, the self-ruled island that Beijing deems a breakaway province.
The latest flare-up also comes amid disagreements over Internet freedoms in China, after search engine Google threatened to pull out over censorship and hacking attacks.
The U.S. Senate unanimously passed a bipartisan resolution on Tuesday urging China to conduct a transparent investigation into the cyber attacks against Google and other firms.
Beijing has become increasingly assertive about opposing the Dalai Lama's meetings with foreign leaders and the issue is a volatile theme among patriotic Chinese, who see Western criticism of Chinese policy in Tibet as meddling.
The Dalai Lama fled Tibet in 1959 after a failed uprising against Chinese Communist Party forces who entered the region from 1950. He says he wants true autonomy for Tibet under Chinese sovereignty but Beijing says he seeks outright independence.
Previous U.S. presidents, including Obama's predecessor George W. Bush, have met the Dalai Lama, drawing angry words from Beijing but no substantive reprisals.
China's latest statement did not mention any specific retaliation over Obama's planned meeting.
But a Chinese foreign policy analyst said the response from Beijing, increasingly assertive on what it sees as core concerns, would be tougher than Washington anticipates.
Thu, Feb 4 09:16 AM
President Barack Obama vowed to "get much tougher" with China on trade rules, including currency rates, to ensure that U.S. goods do not face a competitive disadvantage.
With U.S.-Chinese relations under pressure over a host of issues, including U.S. arms sales to Taiwan and Obama's planned meeting with Tibet's spiritual leader, the Dalai Lama, Obama said his administration was pushing China and other countries to enforce trade rules and open their markets.
"The approach that we're taking is to try to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways," Obama told a meeting with Senate Democrats on Wednesday.
"One of the challenges that we've got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price."
But Obama insisted he would not take a protectionist stance toward China, the world's third-largest economy, warning that "to close ourselves off from that market would be a mistake".
Republican Senator Charles Grassley urged Obama to formally label China a currency manipulator to induce Beijing to raise the value of its yuan. Obama so far has resisted that step.
U.S. manufacturers have complained for years Beijing's currency policies give Chinese companies an unfair price advantage. China says exchange rate policy is an internal matter.
YUAN SEEN AS UNDERVALUED
The Peterson Institute for International Economics estimated China's yuan was undervalued by about 30 percent against all world currencies and about 40 percent against the dollar.
The Washington think-tank also said four other East Asian economies -- Hong Kong, Malaysia, Taiwan and Singapore -- needed to let their currencies rise in value.
Obama has twice declined to label China as a currency manipulator, which would escalate the issue to the World Trade Organisation, but faces a third decision on that issue in April.
Finance ministers and central bank governors of the Group of Seven rich nations will discuss China's currency this weekend in Canada, a U.S. Treasury official said.
"The Chinese currency issue is on everybody's mind. It's an issue for everybody," the official said.
Forward contracts for the yuan edged lower early on Thursday, showing the market expects pressure on China to allow the currency to appreciate could have the opposite effect.
One-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.6490 from 6.6410 bid late on Wednesday. A higher bid means lower implied yuan appreciation versus the dollar over the coming year.
The spate of disagreements have led markets to expect a hardening of China's position, making it less likely to accede to pressure to allow the yuan to gain.
"China is unlikely to make significant concessions to U.S. pressure on the yuan, in particular at the current time when the two countries are involved in a slew of disputes over issues including U.S. arms sales to Taiwan," said a Chinese state-owned bank dealer in Beijing, who asked not to be named.
"If the United States takes a tougher line on the yuan, it may prove to be counterproductive."
REVILED AS SEPARATIST
China on Wednesday warned Obama against meeting the Dalai Lama, reviled by Beijing as a separatist for seeking self-rule for Tibet. The meeting may happen as early as this month.
During a summit in Beijing in November, Chinese President Hu Jintao himself urged Obama not to meet the exiled Tibetan leader, said Ma Zhaoxu, a Chinese Foreign Ministry spokesman.
"We urge the U.S. to fully grasp the high sensitivity of the Tibetan issues, to prudently and appropriately deal with related matters, and avoid bringing further damage to China-U.S. relations," Ma said.
Beijing was already upset with Washington over a $6.4 billion U.S. weapons package for Taiwan, the self-ruled island that Beijing deems a breakaway province.
The latest flare-up also comes amid disagreements over Internet freedoms in China, after search engine Google threatened to pull out over censorship and hacking attacks.
The U.S. Senate unanimously passed a bipartisan resolution on Tuesday urging China to conduct a transparent investigation into the cyber attacks against Google and other firms.
Beijing has become increasingly assertive about opposing the Dalai Lama's meetings with foreign leaders and the issue is a volatile theme among patriotic Chinese, who see Western criticism of Chinese policy in Tibet as meddling.
The Dalai Lama fled Tibet in 1959 after a failed uprising against Chinese Communist Party forces who entered the region from 1950. He says he wants true autonomy for Tibet under Chinese sovereignty but Beijing says he seeks outright independence.
Previous U.S. presidents, including Obama's predecessor George W. Bush, have met the Dalai Lama, drawing angry words from Beijing but no substantive reprisals.
China's latest statement did not mention any specific retaliation over Obama's planned meeting.
But a Chinese foreign policy analyst said the response from Beijing, increasingly assertive on what it sees as core concerns, would be tougher than Washington anticipates.
