Beijing is not bending.
In one the clearest signs yet that China will continue to resist calls for a revaluation of its currency, Chinese Premier Wen Jiabao has offered another stark rejection to the West.
“The Chinese currency is not undervalued,” Mr. Wen said Sunday at the close of the National People's Congress in Beijing. “We oppose all countries engaging in mutual finger-pointing or taking strong measures to force other nations to appreciate their currencies.”
His stance, experts say, reflects an increasingly confident China that knows the United States and Europe are in no position to lecture it on any major issue, from currency policy to political development. Mr. Wen went further than normal, however, labelling the international pressure on China to allow its currency to rise as “a kind of trade protectionism.”
There's a mood of stubborn pushback that's been coming out of Beijing since the fall... The revaluation of the currency is not something they need to do to please the United States, but to rebalance their own economy. — Jeremy Paltiel, Carleton University
Beijing had previously pegged the yuan to the U.S. dollar, but abandoned that policy in July, 2005, in favour of a complex formula composed of various currencies, including the Japanese yen, the euro, the South Korean won and the dollar. For three years, it allowed the yuan to slowly appreciate, but as the global downturn accelerated in 2008, China began to align the yuan more with the greenback, a decision Mr. Wen has since said is “temporary.”
The currency's value has remained largely unchanged at about 6.8 yuan for every U.S. dollar since mid-2008.
Even if revisiting the currency could give a boost to the global economy, Mr. Wen's latest remarks are a reminder that a timetable for change will ultimately come from Beijing, not Washington. And as the chorus grows louder in the U.S. for the Obama administration to formally designate China a currency manipulator, it is clear the bitter spat will continue to sour U.S.-China relations.
It's not that officials in Beijing can't hear the growing cries in the United States and elsewhere to revalue the Chinese yuan. The message from Washington and Brussels has been conveyed through the highest diplomatic channels and is perfectly clear: An undervalued yuan has allowed China's export-driven economy to soar, offered China's youthful technology and financial services sectors a source of protection, while at the same time acting to limit American and European exports to China.
Chinese leaders know this complicated formula intimately, and that is precisely why they are refusing to allow the yuan to appreciate from its pegged position. With Mr. Wen's latest rebuke of foreign governments, “they're more or less throwing the gauntlet down,” said Charles Burton, who twice served as an in-house counsellor at Canada's embassy in Beijing and is now a professor at Brock University.
“In the past, the Chinese comments on this issue have been more ambiguous, more promising,” he said. “As there is a perception that United States is weakening, the Chinese are becoming much more assertive in stating their position, and these remarks by the Chinese premier are pretty direct, pretty clear.”
Ever since the financial crisis, which took root in the U.S. housing market and spread overseas partly through Wall Street's aggressive investment banking practices, Washington has had little to no leverage in negotiations with Beijing.
When President Obama visited the Chinese capital late last year, his statements were largely deferential, with no harsh words on human rights, Tibet or the currency. President Obama also refused to meet the Dalai Lama when he visited the U.S. Observers took these moves as a sign that America no longer holds the cards in the relationship with Beijing, but also as symbolic nods to a new global order in which China now sets or dismantles the agenda, rather than abides by it.
