MercoPress. South Atlantic News Agency

China “not too worried” about India/Brazil’s criticism of Yuan policy

Brazil’s president Dilma Rousseff listened to what Geithner (L) had to say

In spite of United States inciting Brazil and India to criticise China's currency policy, Beijing need “not worry too much” because it can defuse the tension through talks, according to Chinese officials.

Increasingly widespread calls for a stronger Yuan are awkward for Beijing, which is accustomed to facing US pressure over its controlled exchange rate but has long tried to cast itself as the natural ally of other developing nations.

However Brazil and India are unlikely to be any more successful than the United States in persuading Beijing to permit faster appreciation, researchers in Chinese government think tanks said.

“They must realise that the root of problem is not China but the United States,” said Chen Fengying, director of the World Economy Institute at the Institute of Contemporary International Relations in Beijing.

“Yes, we know India's inflation is high and Brazil is raising interest rates, but how can China's currency policy solve those problems?”

Critics accuse Beijing of giving its exporters an unfair advantage by keeping the Yuan low, but the Chinese advisers said that an ultra-loose US monetary policy debasing the dollar was to be blamed for rising currencies in developing nations.

”Complaints from other countries (such as India and Brazil) add to the pressure over the Yuan as they are key trading partners and China has to take them seriously,“ said Song Hong, a senior researcher in the Institute of World Economics and Politics of the Chinese Academy of Social Sciences.

”However, China is unlikely to change its ways because of the additional pressure. When the United States pressed China, China explained itself to Washington, and China can do the same with other countries,“ he said.

The BRICs, a term coined by Goldman Sachs in 2001 to describe the growing influence of large emerging economies, have been at the forefront in pushing for more clout in international forums for developing nations.

Reserve Bank of India governor Duvvuri Subbarao said last week that an artificially low Yuan hurt his country.

And Brazil's newly elected President Dilma Rousseff, in part pressured by a relentless rise in the Real local currency, has pointed to an undervalued Yuan as a threat, flooding her country with cheap Chinese imports and eroding Brazil's export competitiveness.

Last week US Treasury Secretary Timothy Geithner's visited Brazil where he urged Roussef to do more to lobby Beijing to let its currency float.

”No matter if the pressure is from developed countries or emerging markets, the Chinese government is very unlikely to yield too much over the exchange rate issue,” said He Maochun, an international studies professor at Tsinghua University.