America this week decided to postpone the mid-April release of a Treasury report that was widely expected to call China a “currency manipulator”. Anti-China sentiment has been mounting in Congress as politicians have complained that China’s policy of fixing the yuan to the dollar gives it an unfair trade advantage. China now appears to be signalling that it is willing to end the peg. A senior government economist said China could widen the daily trading band for the yuan and allow it to appreciate.
What the commentators said
Protectionism “throttled world trade” in the 1930s and deepened the Depression, said Randall Forsyth on Barrons.com. A confrontation between the US and China, with America slapping tariffs on Chinese goods and China retaliating, could have had a similarly “disastrous” impact today. Luckily it looks as if they’re “working to prevent a replay of the policy blunders of the 1930s”. Kicking the report into the long grass was “politically smart”, said Capital Economics. It lets China change its currency regime without appearing to bow to US pressure. Reforming the currency regime would help China, said Ian Campbell on Breakingviews.After all, inflation is rising quickly and cheaper imports would temper the trend, while revaluation would also boost Chinese consumers’ purchasing power. Ending the peg would “be part of China’s gradual transformation from export-led adolescent to more mature, wealthier economy”.