MercoPress. South Atlantic News Agency

China calls on US not to make the Yuan de facto dollar peg “a political issue”

President Obama must decide by next month if China is labelled a “currency manipulator”

The United States should not make a political issue out of the Yuan, a Chinese central banker said as the long running friction between the world’s two leading economies approaches a critical deadline.

The Yuan's de facto dollar peg could come to a collision point next month when President Barack Obama's must decide whether to brand China as a “currency manipulator.”

People's Bank of China Vice Governor Su Ning said the US should look to itself to boost exports and not cast blame on other countries, when asked to comment on remarks on Thursday by Obama, who called on China to move to a “more market-oriented exchange rate.”
“We always refuse to politicize the Yuan exchange rate issue, and we never think that one country should ask another country for help in solving its own problems,” he said.

Obama's rare comment about the currency comes as his administration mulls whether to use the “currency manipulator” label in a semi-annual Treasury Department report due on April 15, which could set in train punitive actions against China.

With Obama facing domestic pressure to take a tough line against China and Beijing clinging to its dollar peg, the report could act as a tipping point.

If China flinches, it may soon resume the Yuan appreciation halted in mid-2008 to cushion the country from the global credit crunch. But if China keeps the Yuan locked in place, then scattered trade spats between the two giants could escalate into a full-fledged dispute, with Washington even considering across-the-board tariffs against Chinese products.

Li Jianwei, a director in Development Research Center, a think-tank under China's cabinet, was unequivocal: demands for aggressive Yuan appreciation will harm not only China but also the United States and others.

“A stronger Yuan will hit exports and lead to a double dip in the Chinese economy, which in turn will hamper the global economic recovery,” Li said.

Still, there are hints of division within China about the Yuan. With inflation fast creeping up, investors are beginning to wonder just when the government will allow the Yuan to rise again.

Data this week showed that China has considerable growth momentum and mounting price pressures, leading many analysts to conclude that the central bank will soon increase reserve requirements for the third time this year.

The central bank has been in overdrive, trying to dispel worries over inflation after consumer prices rose more than expected to 2.7 percent in the year to February from 1.5 percent in the year to January