US economists oppose punitive measures against China

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Nobel Laureate economists on Wednesday urged American politicians to restrain from imposing punitive measures against imports of Chinese goods, calling it both unwise and useless.

"This is crude populism and represents the attempt of the two parties to win voters," said James Heckman, professor of economics at the University of Chicago, in an exclusive interview with Xinhua.

"What I do worry about is that there has been a lot of talking about taxing the Chinese and punishing them," said Heckman on the sidelines of a forum celebrating the opening of University of Chicago Center in Beijing.

The statement comes two days after 93 U.S. lawmakers signed a letter urging Democratic leaders in the House of Representatives to schedule a vote on a bill to get tougher with China.

The bill would allow the U.S. Commerce Department to slap countervailing and anti-dumping duties on "injurious imports from any country that persistently undervalues its currency."

The Chinese currency has seen increased volatility in the trading days since the People's Bank of China (PBOC), the central bank, announced on June 19 that it would increase the currency's exchange rate flexibility.

The yuan's central parity against the U.S. dollar has risen by 1.5 percent from the rate of 6.8275 per U.S. dollar, set a day before the PBOC's pledge to increase flexibility.

A more expensive Chinese currency would help, in some sense, but the key problem was in the U.S. economic policies which had proven to be ineffective, said Heckman, who won the Nobel Prize in Economic Sciences in 2000.

He said the current difficulties facing the U.S. economy in the form of high unemployment and a staggering deficit mainly stemmed from its own "unwise policies" that finance consumption and practice large tax cuts.

"There is an issue that China and the rest of the world has to be worried about -- How much will America continue to live beyond its means and whether America has the political will to solve the problem?"

He called upon the U.S. leadership to wake up to a deeper understanding of the nature of the deficit problem and look to a much longer-term solution, and deemed the proposed action as pure politics.

"Every serious person in economics said we have to deal with the deficit, but the government has not listened to it," Heckman said.

He said America's soft money policy and its consumption patterns were not sustainable and had to be adjusted, but "We don't even have a serious discussion about the nature of the deficit problem in America."

"It is easy to attack China, and so many people in the US will say it is the Chinese who are responsible for the lack of jobs, but they don't look at the deep structural questions," Heckman said.

"I don't believe that any American with any integrity would advocate this kind of punitive policy toward China, which is pure politics."

Echoing Heckman's words, another Nobel Laureate economist present at the opening ceremony, Gary Becker, said it was the U.S. who should take significant responsibility for its problems.

"The U.S. has a very low savings rate which has contributed in a very important manner to its current difficult situations and the global financial crisis, as well," said Becker, a professor of economics and sociology at the University of Chicago.

Heckman and Becker called for caution, as some economists suggest China sell down its vast holdings of U.S. Treasuries, which makes up some two-thirds of its 2.45 trillion U.S. dollars in international reserves.

"If China dumps a lot of U.S. dollars, that would be unwise, because that would create a currency crisis in the currency market," he said.

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