Magazine

Don't Blame China for the Global Downturn


"Will China revalue?" (Asian Business, July 7) is a well-rounded report. The authors illustrate clearly the recent development of China's currency issue -- from foreign political pressure to revalue to domestic policy balancing to stay still. Two matters, however, are neglected. First, revaluing China's yuan exchange rate is not the same as reforming China's foreign exchange system. It is the latter that is China's long-term international monetary-policy goal, which is also what the major powers expect. Revaluing the yuan immediately, according to discussions among academics, might well hinder the transformation of the nation's foreign exchange system. It might take three to five years. Haste makes waste.

Second, it is unfair for other countries to make China the scapegoat for their own problems, which are part of a serious situation worldwide. Moreover, as a less-developed nation with the largest population and with a century of exploitation by imperialist powers, China has never been an economic paradise, despite rapid gross domestic product growth in past decades. The country's heaviest responsibility is to rebuild its national economy and to raise the living standards of its people.

It's unwise for China to keep blaming outsiders for her lagging behind. Neither will scolding China prove a ticket to economic success for other countries.

Cheng Shuaihua

Development Research Center

Shanghai Municipal Government

Shanghai You point out that Japan used massive currency intervention, to the tune of $50 billion, to "discourage" the "speculators" ("How Japan kept a lid on the yen," Asian Business, July 7). It is not surprising to see Japan -- once again -- manipulate what should be a much stronger currency, and as a result divert part of her deflation to the U.S. and the European Union. Simultaneously, the Bank of Japan prints the yen it needs to reflate, since buying dollars means crediting the sellers' accounts with yen.

These hidden subsidies can easily and quickly destroy the U.S. and EU domestic manufacturing base, if they have not done so already. They would also appear to be in contravention of World Trade Organization regulations that frown upon subsidies of exports. Is Washington asleep at the wheel of its Toyotas, or has it become too addicted to Japan funding our tax cuts and deficits?

To be balanced: The Bank of China, which also recycles China's intervention dollars into Treasury paper, deploys the same anticompetitive mechanism.

Joerg Schroeder

Stamford, Conn.


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