China, Trade and Different Schools of Thought

By November 17, 2009Trade

The Nightly Business Report last night covered President Obama’s meetings in Beijing, including important issues involving trade and currency. Darren Gersh reported, and NBR has already posted a transcript. Excerpt:

GERSH: American exporters argue the yuan is kept artificially undervalued in order to boost Chinese exports, a complaint President Obama will raise in Beijing. But Win Thin [senior currency strategist, Brown Brothers Harrisman] expects Chinese leaders will not allow the yuan to budge until the financial crisis is safely behind them, meaning next summer at the earliest. Even so, the Chinese are aware a loose yuan policy may overheat their economy.

THIN: Where does all that liquidity go? It does go to buying goods. It goes to buying — perhaps into investing in plants and infrastructure. But a lot of it is going into asset markets. The property market is approaching bubble territory. Equity markets are very frothy. So I think the policy makers are concerned.

GERSH: Trade expert Dan Griswold is somewhat less concerned. He argues U.S.-China trade has provided stability to the global economy.

DANIEL GRISWOLD, CENTER FOR TRADE POLICY, CATO INSTITUTE: Part of the rebound in east Asia is countries ability to export to China and to hitch their wagon to China’s continued strong growth. So I think it is in China’s interest to liberalize its currency, but I don’t see any crisis.

GERSH: While many U.S. manufacturers would like to see China boost its currency, they are not expecting rapid results. At the National Association of Manufacturers, Frank Vargo thinks the Chinese aren’t quite sure how to settle this currency debate.

FRANK VARGO, VP INTERNATIONAL, NAM: And I think within the Chinese government there are different schools of thought. There are the old- liners from the industry ministries who say you just can’t do this. And there are those I think from the financial ministry who say we’ve got to do it.

A more complete transcript for the evening broadcast is also posted here. Quick work!

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