Keeping dollar low hurts others: Greenspan
Former Federal Reserve chairman Alan Greenspan says both the US and China are pursuing a policy of weakening their currencies.
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Germany, China Lead International Criticism Of Decision By U.S. Federal Reserve To Buy $600 Billion In Bonds
Washington, D.C., United States (AHN) – The decision by the United States Federal Reserve to pump $600 billion into the nation’s economy by buying U.S. Treasury Bonds has sparked international criticism led by Germany and China.
China and Germany represent the world’s second- and fourth-largest economies respectively. In addition, they were joined by Brazil and South Africa in criticizing the “quantitative easing.” Quantitative easing is the economic term for buying assets to attempt to boost the economy and lower unemployment.
However, Germany, China, Brazil and South Africa allege that the scheme will not help the U.S. economy and will instead create more problems in the rest of the world. Quantitative easing is expected to lower the value of the dollar, which will make U.S. exports cheaper in world markets.
That means that U.S. exports would be more competitive against German and Chinese exports.
Indeed, the dollar did plunge in value against several of the world’s currencies on Thursday.
Germany’s Finance Minister Wolfgang Schaeuble on Friday said the U.S. Federal Reserve’s move would undermine efforts to create a level playing field in the currency markets.
China Central Bank chief Zhou Xiaochuan said the U.S. should focus on reforming the international currency system. He argued that if the U.S. central banking policy is good for the U.S., but not good for the rest of the world that it might have a negative impact on the rest of the world.
The U.S. has criticized China for artificially keeping its currency devalued for many years to make its exports cheaper. But China made that move when its country had full employment and a budget surplus. The U.S. central bank is not buying U.S. Treasury bonds to deflate the value of the dollar abroad but rather to try to pour money into the American economy – which currently has a budget deficit – and to stimulate the weak economy to encourage American businesses to hire unemployed American workers at a time of continued high unemployment.
Germany also criticized the move because they said it would add to America’s deficit.
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Dollar printing is feeding inflation in China: minister
BEIJING: Rampant issuance of dollars by the United States is saddling China with “imported inflation”, Chinese commerce minister Chen Deming was quoted as saying by state media on Wednesday.
“Given the current situation, companies have thought ahead and prepared for exchange rate fluctuations as well as an increase in labour costs,” Chen said, according to the state-run China Business News.
“But because the issuance of dollars is out of control, and international commodities prices are continuing to rise, China is confronted with imported inflation, which has created major uncertainties for businesses,” he said.
The comments came ahead of a meeting of the US Federal Reserve next week at which the central bank is expected to announce additional stimulus measures.
While critics in the United States accuse China of artificially undervaluing its currency to give exporters an unfair advantage, Beijing says Washington is foisting its economic woes on the rest of the world by printing more money.
Beijing pledged in June to let the yuan trade more freely and the currency has since strengthened slightly, but US and European policymakers say it could be undervalued by as much as 40 per cent.
At the weekend, Group of 20 finance ministers meeting in South Korea pledged to “refrain from competitive devaluation of currencies” and aim for “more market-determined exchange rate systems”.
Jittery financial markets were looking for a strong stand from G20 members against beggar-thy-neighbour currency policies, in the leadup to a November 11-12 summit in Seoul.
Chinese Finance Minister Xie Xuren urged “major reserve currency countries to take responsible economic policies”, with the dollar sliding on expectations that the Federal Reserve would launch even bolder monetary easing.
China’s central bank on Wednesday set the central parity rate at 6.6912, weaker than the 6.6762 on Tuesday. The yuan can trade up or down 0.5 per cent from that mark. – AFP
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Price of oil hits six-month high
The price of oil hits a six-month high after strong manufacturing data in the US and China boosts confidence in the global recovery.
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Geithner heads to China with forex demand
US Treasury Secretary Timothy Geithner was to head to China on Sunday bearing a demand for emerging economies to let their currencies appreciate, following fractious G20 talks in South Korea.
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China Sparks Wide Sell-Off
China surprised investors by raising interest rates, sparking a world-wide sell-off in stocks, commodities and emerging-markets currencies as investors lowered their expectations for Chinese growth, which has been seen as a key driver of the global economy.
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Chinese Hike Hits Equities, Commodities
News that China’s central bank is set to raise interest rates ramped up speculation that global political powers could be nearing a deal on exchange-rate tensions.
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China must stop forex war escalating-German minister
China should make concessions to avoid escalating foreign exchange tensions turning into a trade war, German Economy Minister Rainer Bruederle was quoted as saying on Wednesday.
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China Pledges to Balance Trade as U.S. House Prepares Tariff Vote
Washington, D.C., United States (AHN) – The Chinese government announced Wednesday it would allow the value of its currency to rise one day before a vote in Congress on whether to penalize countries that undervalue their money.
China will “further improve” its currency exchange rate and “increase the flexibility” of the yuan, the People’s Bank of China said in a statement on its Web site.
U.S. economists accuse China’s government of subsidizing its currency exchange rate to make it artificially low compared to the currency of the United States and other countries.
As a result, its manufactured products can be sold internationally at lower prices compared with competitors.
Some members of Congress say the undervalued Chinese currency is unfair competition that is forcing American manufacturers out of business and has cost millions of jobs.
A bill in Congress would allow American companies to petition the U.S. government to impose tariffs on the products of any country with undervalued currency, such as China.
The bill is set for a vote Sept. 30 in the House of Representatives. The Senate plans to vote on its version of the same bill after the November elections.
“The bill we vote on this week will help level the playing field for American businesses and workers,” House Majority Leader Steny Hoyer (D-Md.) said in a speech Tuesday.
However, a new Congressional Budget Office report questions whether the proposed legislation would be effective in equalizing trade between China and the United States.
Some economists say China’s undervalued currency helped it surpass Japan this year as the world’s second largest economy. China beat out Germany last year as the biggest exporter.
Chinese government reforms would “enhance exchange rate flexibility against the backdrop of a recovering global economy,” the People’s Bank of China announcement said.
However, it gave no details of the planned reforms.
Some members of Congress are skeptical of the Chinese government’s sincerity.
In June, the Chinese made other pledges to stop underwriting the value of their currency.
Since then, the value of the Chinese yuan has risen only 2 percent while the value of the U.S. dollar declined amid ongoing economic problems.
During congressional hearings in recent weeks, economists said China’s exchange rate has contributed to the high U.S. unemployment rate, which stands at 9.6 percent.
Congress is under pressure from voters and industry to create more jobs.
The Precision Metalforming Association, a trade group of small auto-parts makers, said in a statement this week that China’s currency exchange rate “gives an unfair and illegal advantage to our overseas competition.”
China’s central bank did not mention the pending congressional bill in its announcement Wednesday of currency reform measures.
The new value of the yuan would be “based on market supply and demand with reference to a basket of currencies,” the Web site announcement said.
If Congress does approve the trade bill, the new tariffs are likely to raise only $20 million a year, a Congressional Budget Office report released this week said.
The $20 million a year is tiny compared with the $1 billion per day China imports into the United States, the report said.
“Many [Chinese] imports do not injure domestic firms because there are no competitors currently operating in the United States,” the Congressional Budget Office report said.
U.S. businesses that previously made the products already have shut down after being overwhelmed by foreign competition.
As a result, there are likely to be few U.S. manufacturers who would petition for the U.S. government to impose tariffs on Chinese competitors, the Congressional Budget Office reported.
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Ahead of U.S. vote, China vows more flexible yuan
China will increase the flexibility of the yuan and improve the way it manages the exchange rate with reference to a basket of currencies of the country’s trading partners, the central bank said on Wednesday.
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