Posted by: Bruce Einhorn on December 3, 2008
Maybe Hank Paulson, the Bush Administration’s Old China Hand and friend of Beijing, won’t get such a warm reception on his final trip to China as treasury secretary. Paulson is now on his way to Beijing for two days of meetings grandly called the “Strategic Economic Dialogue.” In a preview, he yesterday gave a speech calling for China to allow its currency, the yuan (also known as the renminbi, or just RMB), to appreciate more against the dollar. “Continued reform of China’s exchange rate policies is an integral part of this broader reform process,” Reuters reported Paulson saying. “China has appreciated the RMB over 20 percent against the dollar since 2005 — this is important and significant, but it is important that the process continue.”
And what do the Chinese think about that? Headline on the front page of today’s China Daily, the official government newspaper, reads “US urged not to harp on currency issue at talks.” As if the image of a nagging Treasury Secretary wasn’t strong enough indication of Beijing’s stance, the China Daily follows up with a lead story in its business section with this headline: “Think tank wants RMB devaluation.” So there! “China needs to depreciate the renminbi against the US dollar to cushion the greenback’s sharp appreciation versus other major currencies over the past months, a researcher from a top government think tank said yesterday,” the paper reports.
Paulson is a lame duck and the Chinese are probably far more concerned about what the incoming Obama administration plans are for Sino-American relations. But it’s hard to see Obama taking a softer line on the dollar-yuan than the Bushies. If today’s papers are any indication, there will be more conflicts ahead between the two sides.