作者：Leolee 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
When powerful forces
collide head-on at the intersection of politics and economics, the
crash is bound to be loud and unsettling.
Consider the current
rift between the United States and China over China's currency, the
yuan. The Bush administration is publicly pressuring China to allow the
yuan to rise against the dollar to stave off protectionist legislation
in the U.S. Senate. Some lawmakers, responding to concerns on the part
of manufacturers and labor unions, assert that cheap Chinese exports --
made even cheaper by a yuan whose exchange rate, they say, is too low
in relation to the dollar -- give Chinese firms unfair advantage over
American companies and is a major contributor to the U.S. trade deficit
and current-account deficit. In response, Chinese officials, who have
kept the yuan fixed at 8.28 to the dollar since 1994, have said firmly
that they will not be coerced into taking action by a foreign
government seeking to meddle in a matter of national sovereignty.
Faculty members at
Wharton and other China-watchers predict that China will eventually
revalue the yuan, probably this year, because it is in China's own
long-term interest to do so. But the United States, by trying to force
the issue in such a vociferous, public manner, is unnecessarily
antagonizing the Chinese and possibly delaying the revaluation,
according to these experts. They say that the application of pressure
by the United States is a political move designed to assuage interests
adversely affected by competition from China. They add that revaluing
the yuan will not revitalize industries that have been battered by a
longstanding and irreversible trend of certain jobs moving to China,
where labor and production costs are cheap.
"The Chinese are very proud and they are most likely to revalue when we don't expect it," says finance professor Richard Marston,
director of the Weiss Center for International Financial Research at
Wharton. "I think they will do something this year, and it will be
modest. The more pressure we put on them, the more they are going to
balk."
Wharton finance professor Jeremy Siegel
says the U.S. pressure on China simply is "not right," adding that
countries should be left alone to decide what exchange rates they want
to set.
Steve H. Hanke, a
professor of applied economics at Johns Hopkins University and a
longtime foreign exchange and commodities trader, calls the U.S. move
"completely politically driven" and "economic nonsense." He adds: "I
think [U.S. officials] are playing to the special-interest crowd.
There's no question about that."
Richard Moody, vice
president and senior economist at PNC Financial Services Group, in
Pittsburgh echoes these views, calling "extraordinary" the amount of
pressure the United States is applying to China. "It really is a
sovereign decision of the Chinese government as to where they set their
currency," he says. "And the pressure they're coming under is
complicating the process. It's helping to drive a lot of speculative
money into China, with people hoping to make a quick gain on any
revaluation of the currency. It's potentially very destabilizing for
the Chinese economy."
China has kept the
yuan pegged to the dollar in order to encourage exports, which have
contributed so much to its stunning economic growth in recent years,
and to keep a damper on inflation. Determining how much the yuan should
be allowed to appreciate against the greenback is tricky business for
Beijing: A rising yuan would make China's goods more expensive
overseas, curtailing sales and reducing economic growth.
Marston says China
essentially has two options: Allow the yuan to appreciate against the
dollar or peg the yuan's value against a basket of currencies -- the
dollar, the euro and the Japanese yen. But whatever action they decide
to take, Chinese officials should make a bold enough move to avert
calls for another revaluation. They are, however, unlikely to be
sufficiently bold. "Once they take any action, it will be seen as not
enough and it will encourage further speculation," Marston notes. "I'd
tell them to choose an exchange rate high enough so as to reduce the
pressure for further changes. Piecemeal attempts would require
additional changes in the future and increase pressure. They should
repeg the yuan against the dollar or, preferably, against a market
basket.
"What we need to ask
is, 'What can the Chinese do to respond to the pressure without making
major changes?' Marston continues. "They could just announce a modest
appreciation and then repeg the yuan at 5% more or less than that. That
clearly will relieve some of the pressure but could lead to further
calls for additional moves."
A Basket of Currencies
Marston says the
components of a currency basket, and the weight accorded each currency,
would reflect the relative importance of the countries that are major
trading partners with China. The advantage of a basket is that if there
were a movement by the euro against the dollar, for example, China
could adjust to that movement. If the euro were to rise against the
dollar, it would force an appreciation of the yuan against the dollar
and a depreciation of the yuan against the euro.
Noting that the
European Union also has begun to put pressure on the Chinese regarding
the yuan -- in a dispute centered on Chinese textile exports to Europe
-- Marston says America should ease up on China. "With the Europeans
joining us now, we ought to sit back and wait for the Chinese to
respond. We ought to use a little less rhetoric and a little less
action in the Senate and try to use backdoor diplomacy."
Finance professor Richard J. Herring,
director of Wharton's Joseph H. Lauder Institute of Management and
International Studies, believes that China will ultimately move to a
currency-basket peg, probably without explicitly identifying the
weights attached to each currency and probably with a modest
appreciation relative to the dollar. "They will probably also adopt a
band around that peg within which the exchange rate will be allowed to
fluctuate," Herring notes. "That will put China's exchange rate policy
in line with most of the other countries in Asia. Currently only three,
including China, peg to the dollar. The timing, of course, is anyone's
guess, but U.S. policy seems decidedly counterproductive in this
regard."
When
China makes the shift, "it will be, quite properly, to meet China's own
best interests, not to satisfy either the Americans or the Europeans,"
adds Herring. "The problem for China is that its capacity to
'sterilize', or offset, the impact of purchases of dollars with yuan is
constrained by the underdevelopment of Chinese capital markets and the
implicit limits on placements of bonds with Chinese banks. This is,
indeed, the reason that most countries that have undervalued exchange
rates ultimately adjust."
Wharton's Siegel says
China will "eventually" revalue the yuan but is uncertain when that
might be. "I don't think they want to revalue but I think they will for
political reasons. Something like 10% is a possibility."
Moody of PNC expects
that China will allow the yuan to float within a band of plus or minus
10% against either the dollar or a basket. He says such a modest move
will probably leave the United States unsatisfied, but that it will be
sufficient for the Chinese for the time being. "There are reasons to
suggest why it would be in China's interest to have a more flexible
currency," he explains. "It would give them more control over monetary
policy. By pegging the yuan to the dollar, they are implicitly
following the monetary policy of the [U.S.] Federal Reserve. If China's
economy continues to grow and inflation becomes a concern, it's in
their interest to be in control of their own currency. Today, inflation
is relatively tame, but over time it could become a concern."
The Wharton faculty
members and Moody all say that China will not, and should not, allow
the yuan to float freely against the dollar at this time. "It's not
realistic for China at this point to go to a freely floating currency,"
Moody argues. "The dynamics of their economy are not consistent with
that." In a report titled "China Outlook," Moody writes that China
lacks "the types of efficient and transparent capital markets and
financial institutions that are a necessary ingredient of a system with
free flows of capital - into and out of a country - and a
market-determined exchange rate."
"I tend to think they
are not going to go to a float," says Siegel. "Years into the future
that might work. But right now they will just do a revaluation to get
the Americans off their backs." Adds Marston: "There's no possibility
at all that China will go to a floating exchange rate. The notion they
are suddenly going to adopt a free-market philosophy for their currency
is crazy."
An Old Story
Complaints that China
has been "manipulating" its currency to the disadvantage of the United
States have risen periodically in recent years. The lower the yuan
against the dollar, the cheaper Chinese products are for Americans to
purchase and the more expensive U.S. goods are for people in China to
buy. Many in the United States point to China's large trade surplus
with the United States as evidence that the yuan is unfairly
undervalued. The U.S. trade deficit with China stood at $162 billion in
2004. The total U.S. current-account deficit -- the combined balances
on trade, income and other transfers with all countries -- was $665.9
billion in 2004, up $135.3 billion from 2003, according to preliminary
figures compiled by the U.S. Bureau of Economic Analysis
But Herring says
American officials are mistaken to think that revaluing the yuan is the
answer to the huge U.S. current-account deficit. "Although
hectoring China about the exchange value of the yuan seems to be the
centerpiece of U.S. policy for dealing with the current-account
deficit, it should be remembered that even a very large appreciation of
the yuan would have only a modest impact on the trade-weighted exchange
value of the dollar. China's share of U.S. imports is about 10%, so
even a 20% appreciation of the yuan -- which is much larger than most
experts anticipate -- would have at best a 2% impact on the
trade-weighted exchange value of the dollar. The answer to our current-account deficit lies not in Beijing, but in Washington, D.C."
What got the latest
controversy started was legislation introduced by U.S. Sen. Charles
Schumer, a New York Democrat, to impose a 27.5% tariff on imports from
China as a response to the so-called currency "manipulation." The
Senate is expected to vote on the bill this summer.
According to The Wall Street Journal,
U.S. Treasury Secretary John Snow told reporters on May 17 that "in the
absence of reforms, I'm very concerned there will be mounting
protectionist pressure in the United States. That's something we need
to avoid." Those comments came the same day that the Treasury
Department issued a report to Congress on international and
exchange-rate policies. The report stopped short of officially calling
China a country that "manipulates" its currency to get a leg up on
international competitors, but it nonetheless strongly urged China to
allow the yuan to appreciate.
In a formal statement
accompanying the report, Snow said China's current rigid currency
regime has become highly distortionary. Among other things, he said,
the current yuan-dollar exchange rate "poses risks to the health of the
Chinese economy, such as sowing the seeds for excess liquidity
creation, asset price inflation, large speculative capital flows, and
over-investment. It also poses risks to its neighbors, since their
ability to follow more independent and anti-inflationary monetary
policies is constrained by competitiveness considerations relative to
China. A more flexible system will also support economic stability,
which we understand is of paramount importance to the Chinese
leadership."
Snow stressed that
the United States is not calling for "an immediate free float with
fully liberalized capital markets," explaining that China is not
prepared for such a major shift. What the United States wants,
according to Snow, is "an intermediate step that reflects underlying
market conditions and allows for a smooth transition -- when
appropriate -- to a full float."
The Threat to China's Economy
Hanke of Johns
Hopkins finds Snow's comments unconvincing. "Snow has contradicted
himself several times. He says '[China] is ready to have a flexible
system, but we don't want them to have a free float.' He doesn't know
what he's talking about."
Hanke, who was an
adviser to the Indonesian government during the 1998 Asian currency
crisis, says a major revaluation of the yuan would devastate China's
economy. He says a 25% revaluation, for instance, would bring on "a
complete economic slump. The negative ripple effects would be
unbelievable and quite destabilizing in China. ... You already have
such a mountain of non-performing loans in China, and that would become
catastrophic. Also, the real-estate boom or bubble along the coast
would completely collapse and the banking system would implode."
In addition, says Wharton management professor Marshall Meyer,
"Chinese agriculture is very inefficient, and farmers are heavily
subsidized. Revaluation will lower the prices of imported foodstuffs,
with grievous consequences for farmers' income and possibly political
stability. The numbers are striking: 62% of China's population is
rural. That means that farmers' cash income comes from the 40% of food
sold on the market. About 10% of this 40% is already imported. If the
10% goes to 20%, farmers lose a third of their cash income."
Meanwhile, in
testimony before the Senate Banking Committee in Washington on May 26,
Snow predicted that China would revalue the yuan, also known as the
renminbi, by mid-October, when the Treasury Department is scheduled to
release its next report on currency manipulation, according to news
reports. A day later, Chinese officials reiterated their position that
they would take a cautious approach to economic reforms, Reuters
reported. Zhang Yansheng of China's National Development and Reform
Commission said much work was still needed in such areas as currency,
taxation and foreign-trade policy to minimize the impact of yuan reform
on China's economy, according to Reuters. "It will be better to keep
the renminbi's exchange rate stable for another two years," Zhang told
the International Business Daily, a newspaper published by the Chinese Ministry of Commerce, Reuters reported.
U.S. officials may
complain about China's foreign-exchange policy but Marston says it
should also be kept in mind that China is a major purchaser of U.S.
Treasury securities, which helps to keep the U.S. current account
deficit from being worse than it is. And having the Chinese revalue the
yuan will not make a major dent in reducing that deficit.
Says Marston: "The
current-account deficit is at records levels. It's a very serious
problem. The deficit, which stems from low savings rates in the U.S.,
has to be financed by capital inflows from abroad. To make inroads on
lowering that deficit, you can change the exchange rate between the
dollar and other currencies. But I think the deficit is far too large
for currency changes have a major effect. The U.S. savings rate is only
1% of GDP [gross domestic product], an all-time low. Unless we do
something about savings in this country, we're not going to have a
major change in the current-account deficit. Some say, 'If we could
only get China to revalue its currency, our deficit would disappear.'
No economist believes that."
Beijing's Global Forum
The views of the
Wharton faculty on the yuan were echoed by economists and others who
attended the Fortune Global Forum in Beijing on May 17. During an
afternoon session on the global impact of dollar depreciation, Stephen
Roach, chief global economist of Morgan Stanley, called "pure politics"
the criticism from U.S. lobbying groups that the fixed yuan exchange
rate has caused the country's huge trade deficit. "What worries me most
is that the value of the yuan becomes too correlated to the value of
the dollar. The U.S. is China's biggest export market. Any adjustment
the U.S. makes to its current account will affect China's exports,
sending ripple effects" throughout the country, Roach said, adding that
the Schumer bill introduced into the U.S. Senate in April is "an
upsetting measure."
Stuart Gulliver,
chief executive, corporate, investment banking and markets, HSBC, said
China's trade surplus is largely due to its cheap labor. Trade with
China accounted for only 10% of total U.S. trade, he noted, adding that
in order for the U.S. to solve its deficit problem, it should control
excessive consumption in addition to pushing for dollar depreciation."
As for when China should move to reform its fixed rate currency system,
the country should do so when it "feels that the time is right." In
terms of which direction the reform should go, he said, "obviously that
falls within China's sovereignty." If the yuan were to appreciate too
early, he added, that would only introduce more speculative capital to
the market.
Li Jiange, vice
director of the development research center of the State Council, noted
that senior Chinese government officials have said repeatedly that
China's currency reform should be carried out according to the
country's needs, taking into account the potential impact on China's
financial systems, trade and manufacturing. Kevin Watts, chairman of
Merrill Lynch International, suggested that the yuan exchange rate is
not the top economic challenge facing the world, and its importance is
being exaggerated.
As many experts
attending the discussion pointed out, political pressure -- not
economic factors -- is pushing the U.S. to demand yuan appreciation.
Most agreed that any drastic yuan appreciation would not only be
disastrous to China but also bad news to American consumers who have
grown used to cheap made-in-China goods and products.
During a session at
the Forum on "Understanding China's Capital Markets," Zhou Xiaochuan,
governor of the People's Bank of China, noted that "If we reform the
exchange-rate system in a way that will improve foreign and domestic
investors' confidence, such reform benefits the capital markets." Zhou
also said that Prime Minister Wen Jiabao's speech earlier made it clear
that the government will not carry out currency reform in a hurry. No
timetable was offered.
China's State
Administration of Foreign Exchange on May 10 issued rules capping
short-term borrowing offshore at $34.8 billion for foreign banks and
$24.5 billion for Chinese banks. The move was aimed at releasing
pressure on the yuan caused by growing capital inflows. On May 18,
China expanded its foreign exchange trading system in an effort to help
develop China's interbank foreign exchange market and release
speculative pressure on the yuan.
On May 20, China said
it is raising duties on 74 textile products starting June 1. The new
tariffs will curb China's textile exports to the U.S. and Europe.
China's garment exports have surged since a global quota system was
scrapped at the end of 2004. Among the 74 items are seven kinds of
clothing imports that the U.S. targeted for new trade quotas.
Then on May 30, China
announced that it was rescinding its planned tariff increases on
Chinese-made textiles exported to the U.S. and Europe.
The View from Chinese Economists
Peng Xinyun, a
currency expert at the Institute of Bank and Finance, Chinese Academy
of Social Sciences, told reporters that it's not the best time for yuan
appreciation. To recapitalize state-owned banks, China recently
injected a total of $60 billion of its foreign exchange reserves into
the Bank of China, the China Construction Bank and the Industrial and
Commercial Bank of China. If the yuan were to appreciate, the capital
level at those banks would come down, dealing a blow to the
government's efforts to recapitalize them. "China won't allow yuan
appreciation until the commercial banks have adequate access to
capital," he said.
According to Yi
Xianrong, a researcher at the Institute of Bank and Finance, Chinese
Academy of Social Sciences, the benefits to the U.S. from the yuan's
peg to the dollar actually outweigh the negatives. Furthermore, now is
not the right time for yuan appreciation. Agricultural exports are not
a big concern, he said, noting that China's agricultural products can
compete in the global markets and will become even more competitive
once further technological progress is made.
Lin Yifu,
director of the China Center for Economic Research at Peking
University, expressed the following views while talking to Sino.com
visitors about economic issues: "The
large fiscal deficit and low savings rate are the main causes for the
huge U.S. trade deficit. Appreciation of the yuan won't help the U.S.
with its trade deficit at all, because most of China's exports to the
U.S. are labor-intensive products that are not produced in the U.S. If
the yuan were to appreciate, the U.S. would have two choices: It could
continue to buy those products from China, but it would have to pay
more, further enlarging the deficit; or it could buy those products
from other countries that also have cheap labor. The reason that the
U.S. hasn't bought those products from other countries is because they
are relatively more expensive than China's. That's why yuan
appreciation won't help the U.S." He also noted that the Chinese
government still has a number of fiscal responsibilities, such as
recapitalizing state-owned banks burdened by bad loans and supporting
the social security system.
Ba Shusong, vice
director of the Finance Research Center at the State Council's
Development Research center, suggested that "American politicians seem
to believe that yuan appreciation could narrow the country's
current-account deficit." Instead, he said, the U.S. government "should
choose the following measures: tightening its economic policies,
including narrowing its fiscal deficit, and raising interest rates to
curb consumption while encouraging saving. It is a process full of
economic and political adjustments, and there could be substantial
political obstacles. That's why American politicians prefer pushing for
dollar depreciation over making internal economic adjustments."
The U.S. "also hopes
that other currencies' appreciation could release pressure on the
dollar," he added. "It's the fundamental reason that the U.S. is
actively pushing for yuan appreciation ... But even a substantial yuan
appreciation would have only a very limited role in helping the U.S.
improve its trade situation.... In fact, given the economic
interdependence between China and the U.S., any substantial import
tariff measures adopted by the U.S. unilaterally wouldn't be efficient
and would harm the U.S. economy in the longer term."
Huang Zemin, an
expert on exchange rates and dean of the business school at East China
Normal University, told Chinese reporters that "at present, China
should focus its exchange-rate reform on the foreign-currency
administration system. Due to China's economic reliance on trade,
balance of payments should be the main factor for judging whether the
yuan exchange rate is reasonable. Our exchange rate has been balanced
in the past three years.... The trade imbalance between China and the
U.S. is not because of the yuan exchange rate, but because of the two
countries' different trade structures."
U.S., European Protectionism
Salvador Rojí,
professor of multinational financial management at the Complutense
University of Madrid, predicts that China will "ultimately wind up
revaluing its currency because of pressure from other countries,
especially the United States." The revaluation process will be gradual,
he says, to avoid any breakdown in economic stability.
As for the
politically sensitive area of textile exports, China is already
restricting its exports through increases in its export taxes -- an
action that is "something quite different from placing direct limits on
the volume of exports," adds Rojí. "Whether they do that will depend on
regional trade agreements between China and Europe, which include other
products and services traded bilaterally."
Asked if it is
hypocritical of the U.S. and the EU to place limits on free trade now
that it is causing problems for U.S. and European textile
manufacturers, he notes that "historically, there have been many
occasions when the U.S. and Europe have not hidden their protectionist
feelings about third parties. In the West, the halo of liberalism
doesn't cover everyone, and very few countries fully embrace free
trade. Generally, it is only small countries that do, like Singapore
and Holland, which have minimal domestic markets and need to open
themselves to the outside. Given the semi-protectionist history of both
the U.S. and EU, we cannot talk about 'hypocrisy.' It's simply that
they are defending their social and political interests. And they do
not hide that fact."
In
looking at whether each country should have the right to control its
own currency, Rojí suggests that sovereign states can utilize their
exchange rate as a tool to compensate for any increase in their
inflation rate that cuts their [global] competitiveness, as well as for
providing benefits to specific economic groups, such as exporters.
However, when governments give up that power, as in the case of the
euro zone members, governments can only carry out fiscal policies,
improve efficiency and productivity, and set wage limits. They cannot
make use of the devaluation safety valve
作者：Leolee 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
