China warns of trade war over yuan bill
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China.org.cn, October 11, 2011
China warned the United States on Monday of a trade war if Congress passes a bill pressuring China to appreciate the yuan. The warning came a day before US lawmakers are set to vote on the bill.
Vice-Foreign Minister Cui Tiankai reiterated China's opposition to the bill and said that it will harm global economic recovery and further hurt US jobs growth.
"If the bill becomes law, the only result will be a trade war between the two countries, which will be a lose-lose situation for both sides and will affect the comprehensive development of China-U.S. ties," Cui said.
"(The currency bill) in no way represents the reality of the economic and trade relationship" between the two leading economies, said Cui, who is currently the head of the China delegation for G20 negotiations.
"Of course it would be detrimental to the development of economic ties and might have an adverse impact on bilateral relations.
"If this type of situation occurs, it would certainly have negative effects on US economic and job growth," he said. "At the same time, it would hinder global economic recovery."
China's central bank and the ministries of commerce and foreign affairs last week also warned that the proposed currency bill could trigger a trade war between the two countries.
The legislation, if passed in the Senate, still faces an uncertain future in the House of Representatives.
Republican House Speaker John Boehner has signaled that the legislation will die.
"It's dangerous. You could start a trade war. And a trade war, given the economic uncertainty here and all around the world - it's just very dangerous, and we should not be engaged in this," Boehner said last Thursday.
Economist Robert Mundell, winner of the Nobel Prize, said that US legislation to press China to raise the value of the yuan would be a "disaster".
"This is not going to help Americans," Mundell saidin a Bloomberg Television interview on Sept 27. "This is not going to create jobs for Americans. It's just going to create a disaster.
"This would have a wounding effect on the stability of international relations. There's never been any precedent in economic history where a country, through any legal system, was forced to appreciate its currency relative to another country."
Wang Haifeng, a senior researcher with the Foreign Economic Research Institute, a think tank for the National Development and Reform Commission, told China Daily that the currency bill may bring more harm than good to the US, because trade friction will cut imports from China.
"The passage of this bill will surely spark a trade war and US consumers would be the final victims," Wang said.
Whether this currency issue will have long-term effects on the Sino-US trade relationship depends on how quick the US economy recovers, he added.
The US imposing sanctions on China would violate international trade rules, said Cao Fengqi, director of the Finance and Securities Research Center at Peking University.
"The US should not blame China for its trade deficit and high unemployment," he said.
"The bill will be unfavorable for Chinese exports. China may also take retaliatory measures, including raising tariffs on imports from the US," Cao said. However, he believed the bill has little chance of passing in the House.
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