China hits back at currency criticism

China hits back at currency criticism
By Geoff Dyer in Beijing and Patti Waldmeir in Shanghai
Copyright The Financial Times Limited 2010
Published: March 12 2010 12:51 | Last updated: March 12 2010 12:51
http://www.ft.com/cms/s/0/cc2e691a-2dcd-11df-a971-00144feabdc0.html


China and the US traded barbs on Friday over the economy and human rights, raising the temperature ahead of what could be a crucial showdown over currency policy next month.

Su Ning, a deputy governor of the Chinese central bank, said the US should not “politicise” China’s currency policy, a day after President Barack Obama urged China to adopt a “more market-oriented exchange rate”.

“We always refuse to politicise the yuan exchange rate issue and we never think that one country should ask another for help in solving its own problems,” said Mr Su.

Mr Obama’s comments on Thursday came ahead of a decision the US Treasury department has to make by April 15 on whether to label China as a “currency manipulator”.

Political pressure is beginning to mount again in the US to take action against China if it does not abandon the peg to the US dollar it has held to since mid-2008.

China had appeared to signal it was considering a shift in policy when the head of the central bank said last weekend that the currency peg was a “special” policy for the financial crisis and that it would be abandoned “sooner or later”.

Romano Prodi, the former president of the European Commission and Italian prime minister, said the US and Europe were wrong to openly criticise China over its currency because this would be counterproductive.

”The west must not teach the Chinese what they have to do with the renminbi because otherwise they will never do it. It’s so clear,” he said in an interview with the Financial Times.

Stephen Green, an economist at Standard Chartered in Shanghai, warned that the US and China were entering into a potentially destabilising confrontation. “Get ready for a huge shift in the global debate about the Chinese currency,” he said.

If China did not start to appreciate the renminbi over the next few weeks, he said there was a good chance that the US would label China a currency manipulator, which could eventually pave the way for the US to levy new duties on Chinese products.

“How China responds will set the tone for the global trade and foreign exchange markets for the rest of 2010,” he said.

China also on Friday rejected US criticisms of its human rights record as hypocritical and published its own damning report about human rights in the US.

The report, issued by the State Council Information Office, was a response to the State Department’s annual assessment of human rights released on Thursday, which criticised Chinese internet restrictions and treatment of dissidents.

“The United States not only has a terrible domestic human rights record, it is also the main source of human rights disasters worldwide,” the Chinese report said. “The United States monopolises the strategic resources of the global internet, and has been retaining a tight grip over the internet ever since its first appearance.”

The two governments have issued parallel reports on human rights for several years.