U.S. Companies Suddenly Shy over China Yuan Squabble, While China Executives Speak Out
Large American corporations are largely staying out of the debate over China’s currency evaluation. From Bloomberg:
But if chief executives are worried, they are keeping awfully quiet about it, which may reflect a fear of being seen as out of touch with American workers at a time when unemployment is near 10 percent, investors and academics said.
The Obama administration next month is due to issue a report that could label China a “currency manipulator.” Meanwhile, the Senate is weighing a bill that threatens to slap new tariffs on some Chinese goods if Beijing does not allow its yuan currency to rise in value from the level it has maintained since the global credit crunch flared in mid-2008.
Either move could prompt China to raise new barriers to its imports of big-ticket U.S. goods like airplanes and railroad locomotives. That would be a heavy blow to major U.S. multinationals, who are counting on Chinese demand to offset continued economic weakness at home and in Western Europe.
Meanwhile, another report from Bloomberg says that Chinese business leaders are speaking out in favor of appreciation of the yuan, even though Premier Wen Jiabao has stated he believes the currency is not undervalued:
Yang Yuanqing, chief executive officer of Beijing-based computer maker Lenovo Group Ltd., said gains would boost consumers’ purchasing power. Qin Xiao, chairman of China Merchants Bank Co., said an end to the yuan’s 20-month peg to the dollar would let lenders set market-based interest rates. Chen Daifu, chairman of Hunan Lengshuijiang Iron & Steel Group Co., said a stronger currency would cut import costs.
The remarks are significant because it’s the first time so many executives at state-controlled enterprises have spoken publicly in favor of appreciation since China pegged the yuan at 6.8 per dollar in July 2008 to protect exporters, said Lee Boon Keng, deputy chief investment officer at Bank Julius Baer & Co. in Singapore. The comments are at odds with Premier Wen, who said criticizing the peg amounts to “protectionism,” in a March 14 response to sanction demands from U.S. lawmakers.