Bernanke Criticizes China Over Currency
- Published on Thursday, 05 January 2012 18:59
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A recent US congressional bill penalizing China for allegedly influencing currency has created quite a stir, with both nations criticizing each other’s policies. Ben S. Barnake, Federal Reserve Chairman, came out with a statement blaming China for influencing the currency value of the renminbi and hence slowing the recovering international economy. The undervaluing of renminbi has affected the emerging market economies as global demand has become unbalanced.
Renminbi, the official currency of the People’s Republic of China, had reported a meager 3 % growth against the US dollar in 2011. As a result, the US exporters faced increased competition as Chinese goods have become significantly less expensive than American goods. The allegations were not publicly stated earlier as the dollar had been performing badly against many of the other countries as well. There is widespread concern over the current weak situation of US and international economy and some measures are urgently needed to speed its recovery.
On Monday, there was a discussion in the US senate about the bill which is supposedly unfavorable to countries with undervalued currencies. The remedies discussed included enforcing additional duties on imports from such countries. The Chinese government was quick to respond and the central bank, foreign ministry and the ministry of commerce gave press statements, on the following day, hinting at a “trade war”.
According to Ma Zhaoxu, the spokesman for Foreign Ministry, the bill violates World Trade Organization regulations, and will lead to increased exchange rates and protectionist action. He further added that trade relations between US and China will be adversely affected due to the bill. Other trade experts believe that such measures now, along with Europe’s sovereign- debt crisis, would be detrimental to the global economy.
John Boehner, the House Speaker, said that he understood the concern over undervaluation of renminbi but criticized the bill and legislation, as this might not be the right way to fix the issue at hand. Sander Levin, Senator and a Democrat, also released a statement that China had cheated when they manipulated their currency and so strict measures needed to be taken.
Jay carney, press secretary for white House, said that the Obama administration would be reviewing the legislation but expressed concern over the impact it might have on international relations. Earlier on Monday, the White House had also announced that bilateral agreements with South Korea, Columbia, Panama would be sent to the US Congress for discussion.