Tensions heighten over China’s currency

China and the US exchanged on Friday over the economy and human rights, raising the temperature ahead of a possible showdown over currency policy next month.

Su Ning, a deputy governor of the Chinese central bank, said the US should not “politicize” China’s currency policy, a day after Barack Obama, the US President, urged China to adopt a “more market-oriented exchange rate”. “We always refuse to politicize the yuan exchange rate issue and we never think that one country should ask another for help in solving its own problems,” Mr. Su said Friday.

President Obama’s comments Thursday came ahead of a decision by the US Treasury department that they must make by April 15, 2010 on whether to label China as a “currency manipulator”.

Political pressure is beginning to mount again in the US for action against China if it does not abandon the peg to the USD it has held since mid-2008.

China recently appeared to signal it may be considering a shift in its policy when the head of the central bank said last weekend that the currency peg was a “special” policy for the financial crisis and that it would be abandoned “sooner or later”.

Romano Prodi, former president of the European Commission, said the US and Europe were wrong to criticize China over its currency because this would be counter-productive.

We here at EH are in agreement with Mr. Prodi. The West must not attempt to teach the Chinese what they have to do with their currency, as they will not ever do it as China holds all the cards in this debate, and the US and EU needs the new Global Giant’s cooperation, and in our opinion cannot go it alone as they have done in the past, the world my grow by cooperation. Countries that try to grow alone in this Global World are destine to fail we believe, again cooperation is Key. The Age of One Super Power is past.

Stephen Green, a economist at Standard Chartered in Shanghai, warned that the US and China were approaching a potentially destabilizing confrontation. “Get ready for a huge shift in the global debate about the Chinese currency.” If China does not start to appreciate the renminbi over the next few weeks, he said there was a good chance that the US would label China a currency manipulator. That could pave the way for the US to levy new duties on Chinese products. “How China responds will set the tone for the Global trade and foreign exchange markets for the rest of Y 2010,” he said.

Last Friday China outright rejected US criticisms of its Human Rights record as hypocritical and published its own damning report about Human Rights in the USA. It is very enlightening.Here is a link to the full text of that damming report: http://news.xinhuanet.com/english/2009-02/26/content_10904741.htm

The report was issued by the State Council Information Office as the a response to the US State Department’s annual assessment of human rights released Thursday, which criticized Chinese Internet restrictions and the treatment of dissidents. China has been officially responding to the US reports since 2003.

“The United States not only has a terrible domestic human rights record, it is also the main source of human rights disasters worldwide,” the Chinese report said. —Paul A. Ebeling, Jnr. www.livetradingnews.com

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