Political and economic tension between America and China is mounting. Following a $5.9bn arms deal between Taiwan and the US, China has suspended some military ties with America. The US is appealing to the World Trade Organisation over China’s allegedly unfair duties on US chicken and poultry exports.
A US senator has called for legislation to force China to loosen its control of its currency, the yuan. The US says China deliberately undervalues the yuan, giving it an unfair advantage on world markets. Presidential candidate Mitt Romney promised to declare China a currency manipulator if elected, which would trigger trade sanctions under US law.
What the commentators said
The clamour for faster appreciation of the yuan will grow, said Jamil Anderlini in the FT. After six years of “tightly managed, gradual and interrupted appreciation”, it remains undervalued by most estimates. What’s more, with the growth outlook deteriorating, “embattled Western politicians” will be all the more likely to cry currency manipulation. And if China decides to stop allowing the yuan to rise slowly and freezes its exchange rate instead, as it did in the global crisis of 2008 in order to bolster its crucial export sector, Western protests will only grow.
The international political backdrop bodes ill, said the FT’s Gideon Rachman. In 2009, global policymakers agreed on a co-ordinated stimulus and pledged to resist 1930s-style trade wars. “Now compare the mood today.” Key leaders are split and “looking inwards”. We’ve already seen “currency wars”, with emerging markets trying to keep their currencies low and Switzerland recently joining them. Brazil has now slapped tariffs on Chinese steel tubes. With “international politics drifting”, there’s a “clear danger that the world will belatedly slide into protectionism”.