The US-China Business Council, a federation of American corporations engaged in business relations with China, said on Monday that it opposed attempts to force the Renminbi yuan to appreciate.
John Frisbie, president of the council, made the remarks in an exclusive interview with Xinhua at the ongoing China Business Summit. He said the exchange rate of the yuan was only one of the reasons behind China's huge trade surplus with the US.
The trade imbalance could only be solved through dialogue and the reform of the Renminbi exchange rate had to be a gradual process, said Frisbie.
The US has blamed the low exchange rate of the yuan against the dollar for its expanding deficit with China. According to the Chinese customs authority it reached a new monthly high of 18.8 billion dollars in August.
The deficit in the first eight months of the year totaled US$94.65 billion (according to Chinese figures) fueling calls for action from within the US.
US senators Charles Schumer and Lindsey Graham have said they'll push for a vote by the end of September on their legislation to impose 27.5 percent penalty tariffs on Chinese imports unless China moves to allow a greater appreciation of the yuan.
Frisbie said he was unsure if the Senate would eventually vote on the proposed bill or whether it would be adopted if it did. But he indicated he was sure of at least one thing -- the US and China shared the same goal of having a market-based, free floating regime for the Renminbi.
Stephen Roach, chief economist of the leading US investment bank Morgan Stanley, has said that an appreciation of the yuan wouldn't help the US cut its deficit. Insufficient domestic savings and excessive consumption, not the exchange rate of yuan, were the fundamental reasons for the rising deficit, he said.
Frisbie proposed that China should reform its banking and consumer loan systems and set up a sound social security system so that Chinese people would be encouraged to use some of their bank savings. In this way, he said, the Chinese economy would no longer be driven by exports and investment but by domestic spending. Such reforms would also help to solve exchange rate and trade deficit issues.
The yuan's value had risen by about 3.8 percent against the dollar in the 12 months since July 21, 2005, when China revalued the currency by 2.1 percent and revised its trading system to link the yuan's value to a basket of major currencies instead of just the US dollar.
China has ruled out the possibility of any further appreciation on the same lines. There will be no more "surprise adjustments" Chinese Premier Wen Jiabao told foreign journalists in Beijing recently.
(Xinhua News Agency September 12, 2006)