Threatening China on yuan won't work: EU
"Does anyone think that by shouting and roaring and threatening, that's going to make things better?"india Updated: May 19, 2006 12:59 IST
Threatening China unless it revalues the yuan is a strategy doomed to failure, a senior European Union official said on Thursday, in an implicit rebuke to some US lawmakers.
Charlie McCreevy, EU Internal Market Commissioner, said Beijing was taking a gradual approach to currency reform that, over time, would help to correct imbalances in global trade and capital flows.
"Does anyone think that by shouting and roaring and threatening, that's going to make things better? I don't believe that," McCreevy said in an interview with Reuters in Shanghai, his second stop on a six-day China visit.
Unlike the United States, which has been highly critical of the pace of some of Beijing's financial reforms, most notably the slow appreciation of its currency, the EU has taken a much less confrontational approach.
Two leading Senate critics of China's currency policy told US Treasury Secretary John Snow on Wednesday they were disappointed that Beijing had not moved faster to a market-based exchange rate.
New York Democrat Charles Schumer and Lindsey Graham, a Republican, believe the yuan is undervalued by as much as 40 percent, giving Chinese exporters an unfair advantage that is bloating the country's trade surplus with the United States and costing millions of American jobs.
I'm a believer
The two lawmakers recently delayed a vote on legislation that would impose a 27.5 per cent tariff on Chinese imports into the United States unless Beijing lets the yuan rise much faster.
"I'm a market believer, I believe these things resolve themselves. These global imbalances will have to be corrected over a period of time," McCreevy said.
"The Chinese authorities have adopted a policy of what I would characterise as gradualisation. I am not in a position, nor would I dare suggest to the government what they should do."
The 25-member EU ran a trade deficit with China in 2005 of 106.2 billion euros ($135.5 billion). The United States, which counts Hong Kong as part of China for the purpose of its trade statistics, had a deficit with China last year of $202 billion.
Although Brussels believes quiet diplomacy is the best way to influence policy-making in Beijing, some EU countries have been vocal in their concern that cut-price Chinese exports are threatening wide swathes of their economies.
Italy, for example, was a proponent of tariffs that the EU imposed last month on imports of leather shoes from China and Vietnam. The duties followed the negotiation in 2005 of curbs of imports of Chinese textiles into the EU and the United States.
McCreevy spent the first part of the week in Beijing, where he met Chinese Finance Minister Jin Renqing. The commissioner will travel from Shanghai to Hong Kong, as part of a broader EU effort to strengthen ties with China through regular dialogue.
After a day of meetings between McCreevy and Jin in Beijing, the EU and China issued a joint statement saying China would pursue a prudent monetary policy as it moves to make the yuan more responsive to market conditions.
McCreevy urged China to continue its financial reforms but said their pace and nature should be determined in Beijing, as the Chinese are the best judge of what policies best suit them.