- Reaction score
- 5,959
- Points
- 1,260
Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail, is an interesting report:
http://www.theglobeandmail.com/report-on-business/imf-shines-a-light-on-chinas-rising-star/article1227772/
The Chinese appear to have made the right choices over the past few months and they want some credit, in the halls of the mighty, for doing more than their “fair share” to help us all dig out of the Euro-American fiscal fiasco.
The IMF board is, undoubtedly, correct to encourage China to focus less on exports and to build its service sector but they have to understand that the overarching goal for China is to maintain social harmony and that means maintaining the jobs they have and creating lots and lots of new ones. The process, for the Chinese, has to be slowing the growth of their export business while they, more slowly than they might like, build a service sector.
http://www.theglobeandmail.com/report-on-business/imf-shines-a-light-on-chinas-rising-star/article1227772/
MF shines a light on China's rising star
Toned-down criticism a recognition lecturing, bullying was having little effect
Kevin Carmichael
Ottawa — Thursday, Jul. 23, 2009
There's a new way to measure China's rising clout: A sudden reluctance to criticize its currency policy.
The International Monetary Fund's board of directors Wednesday released a report on China's economy notable for its lack of decisive criticism.
Rather than make accusations of currency manipulation, the report allowed a split opinion.
It noted that “some directors” are of the view that China's currency, the yuan, is “substantially undervalued” while “a number of other directors” accept that it's difficult to make accurate assessments of proper foreign exchange rates.
The wording is significant because the IMF prefers consensus. Compromise was necessary to get China to remove a veto over the release of the fund's annual review of its economy, which it has enforced since 2007 to protest a change in the way the IMF assesses exchange rates. The report signals countries such as the U.S., Britain and Germany have given up their long-standing effort to put the institutional weight of the IMF behind their contention China holds down the value of its currency to give its exporters an unfair trade advantage.
“Directors welcomed the important progress made in the past few years in increasing the market's role in determining the exchange rate,” the report states.
The report goes on to note “the consequent substantial real appreciation that has been achieved since the exchange rate reform in 2005.”
China's holdings of foreign currency reserves climbed above $2-trillion (U.S.) this year, a reflection of the government's efforts to control the value of the yuan.
Under pressure from the United States, Chinese authorities loosened the yuan's peg to the U.S. dollar in 2005 and allowed the currency to edge higher.
The financial crisis has dampened enthusiasm in China for a more-flexible exchange rate. The IMF review noted that the nominal exchange rate of the yuan hasn't risen against the dollar since the middle of 2008.
The Chinese currency, which traded at 6.83 yuan to the U.S. dollar Wednesday, should be 15 per cent to 25 per cent higher against major currencies after adjusting for inflation, according to Morris Goldstein and Nicholas Lardy, economists at the Peterson Institute for International Economics in Washington.
Finance ministers and central bankers from the Group of Seven major industrial countries also have toned down their criticism of China, choosing to highlight the country's progress in adopting more market-oriented policies.
The shift is a result of a growing desire on the part of the world's economic powers to coax China into playing a greater role in international affairs, recognizing that the previous strategy of lecturing and bullying was having little effect.
Mr. Hu's government has the world's third-largest economy on track to grow 7.5 per cent in 2009, even though almost all of the world's developed economies are in recession.
Economic success is creating a boldness that is causing the Chinese regime to stand up to criticism and take a more assertive stand on policy issues.
“The Chinese felt they were being ganged up on,” said Bessma Momani, a senior fellow at the Waterloo, Ont.-based Centre for International Governance Innovation, of the country's reaction to the debate over the valuation of its currency.
As a result of China's success in fighting the global recession, “there's a feeling that they are vindicated,” said Ms. Momani, who is writing a book on the history of the IMF. “They are in a higher position.”
The IMF's 24-member board of directors commended China for its $585-billion stimulus program, and said the government's debt was low enough to do more to boost private consumption.
The board did nudge China's government to move away from its dependence on exports, saying any short-term job losses would eventually be replenished by a stronger services industry.
The Chinese appear to have made the right choices over the past few months and they want some credit, in the halls of the mighty, for doing more than their “fair share” to help us all dig out of the Euro-American fiscal fiasco.
The IMF board is, undoubtedly, correct to encourage China to focus less on exports and to build its service sector but they have to understand that the overarching goal for China is to maintain social harmony and that means maintaining the jobs they have and creating lots and lots of new ones. The process, for the Chinese, has to be slowing the growth of their export business while they, more slowly than they might like, build a service sector.