Bloomberg News

Ex-AIG CEO Greenberg Says U.S. Senate Bill on Yuan a ‘Dumb Idea’

October 17, 2011

Oct. 17 (Bloomberg) -- A U.S. Senate bill designed to punish China for keeping its currency undervalued is a “dumb idea” and risks igniting a trade war, former American International Group Inc. Chief Executive Officer Maurice “Hank” Greenberg said.

“Just doing it was wrong, totally wrong,” Greenberg, who helped build AIG into the world’s largest insurance company, said in an interview with Bloomberg Television. He brokered an agreement that let his firm return to China in 1992 as the first foreign insurer since the 1949 communist revolution.

“That way of thinking protectionist -- it leads to trade wars -- it’s simply wrong,” Greenberg said, adding he didn’t think the House of Representatives would vote on the measure. It’s “not in our national interest and I think it was a dumb idea.”

U.S. House Speaker John Boehner practically declared the measure dead on arrival in the Republican-run chamber after the Senate’s 63-35 vote last week to let U.S. manufacturers seek duties on Chinese imports if they prove they were harmed by manipulation of the yuan, or renminbi. Boehner, of Ohio, voiced “grave concerns” the bill may trigger a trade war.

China may move to restrain the yuan, which has gained the most against the dollar among 25 emerging-market currencies in the past four years, after a report last week showed its exports rose the least in seven months in September.

Failure to allow faster gains by the yuan against the dollar has impeded a shift in demand toward emerging markets that would bolster the global economy, according to Federal Reserve Chairman Ben S. Bernanke.

‘Big Move’

Greenberg, 86, said China has increased the value of the yuan by 30 percent to 35 percent in the past four to five years. “That’s a fairly big move,” he said.

“Even now, China is losing many things that they were manufacturing before,” Greenberg said. “It’s moving to Vietnam, Cambodia, Bangladesh, Central America. Wages have gone up in China quite significantly.”

Former Massachusetts Governor Mitt Romney said last week he will brand China a currency manipulator on his first day as president, saying the U.S. must stand up to cheating in trade relationships.

“I will label China as it is, a currency manipulator,” Romney said in a debate between Republican presidential candidates on Oct. 11.

The U.S. Treasury Department said last week it will delay its twice-yearly report on exchange-rate policies of its trading partners, including China’s, until after global meetings scheduled for this month and next.

Chinese Exports

China’s exports rose a less-than-forecast 17.1 percent in September from a year earlier, a government report showed Oct. 13. Growth in shipments to Europe, China’s biggest export market, slumped to 9.8 percent, from 22 percent, amid the sovereign-debt crisis in the euro area.

The U.S. trade deficit was little changed at a four-month low of $45.6 billion in August as near-record exports helped keep the economy expanding, a government report also showed Oct. 13.

“If we didn’t have a trade deficit with China, we’d have a similar trade deficit with other countries,” said Greenberg, who led AIG as chief executive officer for nearly four decades until 2005. “We don’t manufacture everything here.”

--Editors: Brendan Murray, Ken McCallum

To contact the reporters on this story: Michael Heath in Sydney at mheath1@bloomberg.net; Sara Eisen in New York at seisen2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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