Treasury secretary vows to rally world powers to push for China reforms, but urges caution over straining US-China ties.
|China has defended the yuan, saying the currency policy is not the cause of the trade imbalance with the US [EPA]|
China’s prime minister has rebuffed calls for a drastic appreciation of the yuan, as US legislators push for sanctions against China over alleged currency manipulation.
Wen Jiabao said on Wednesday during a visit to New York that the exchange rate is not to be blamed for the huge US trade deficit, and he called for “large-scale” trade co-operation with the US.
“There is no basis for a drastic appreciation of the renminbi (yuan),” he told members of the US-China Business Committee.
Wen was responding to recent comments from US officials that China is suppressing the value of its currency against the dollar in order to raise the competitiveness of its exports.
“If the renminbi appreciates by 20 to 40 per cent according to the requests of the US government, we do not know how many Chinese companies will go bankrupt and how many Chinese workers will be laid off and how many rural workers will go back to their homes and there will be major turbulence in the Chinese society,” he said, according to a translation of his speech.
Wen said the US and China – the world’s biggest two economies – should “positively carry out large-scale economic and trade co-operation”, while warning that mutual trust was the precondition for such a move.
He said a “sound and stable Sino-US economic and trade relationship is in line with the fundamental interests of both countries”, in comments carried by China’s official Xinhua news agency.
“If the renminbi appreciates by 20 to 40 per cent according to the requests of the US government … there will be major turbulence in the Chinese society”
Wen Jiabao, Chinese prime minister
He said that the “structure of Sino-US investment and trade” was to blame for the massive US trade deficit, not the value of the Chinese currency.
Wen’s remarks came two days ahead of a key US congressional panel vote to push for sanctions against China for allegedly manipulating its currency and distorting trade.
The US has been toughening its rhetoric over China’s currency handling in recent weeks.
Earlier this week Barack Obama, the US president, said that the yuan “is valued lower than market conditions would say it should be”.
Addressing a town hall-style meeting on CNBC television., he said: “What we’ve said to them is, you need to let your currency rise… you’re getting wealthier, you’re exporting a lot, there should be an adjustment there based on market conditions.
“They have said ‘yes’ in theory, but in fact they have not done everything that needs to be done.”
Obama is scheduled to meet Wen in New York on Thursday.
A House of Representatives committee is expected to vote on Friday on a China currency bill that would call on the US commerce department to punish Beijing over the alleged devaluation of the yuan.
“It is time for congress to pass legislation that will give the administration leverage in its bilateral and multilateral negotiations with the Chinese government,” Nancy Pelosi, the House speaker, said in a statement.
“If China allowed its currency to respond to market forces, it could create a million US manufacturing jobs and cut our trade deficit with China by $100bn a year, with no cost to the US treasury.”
Last week Timothy Geithner, the US treasury secretary, also complained that it was “past time for China to move” on the yuan and lift trade barriers.
Despite China’s “important” pledge in June, he said the yuan’s value was “essentially” unchanged in the past two years because of “very substantial” intervention by Chinese authorities.