Associated Press
A worker rests on a construction site in Guangzhou, China. The Chinese government reported in late January that its economy expanded by 10.7 percent during 2009, measured on a fourth-quarter-over-fourth-quarter basis, but some analysts question that figure.China's undervalued currency is costing the U.S. economy more than $200 billion per year in lost growth and is reducing American employment by as much as 1 million jobs, two leading international trade economists claim.
Beijing uses currency manipulation to maintain the value of its currency, the yuan, at an artificially low value, which makes its exports much cheaper and its imports more expensive, charged Nobel laureate Paul Krugman and C. Fred Bergsten, director of the Peterson Institute for International Economics.
The currency manipulation keeps the yuan, also known as the renminbi, undervalued by 25 percent on a trade-weighted basis and 40 percent relative to the dollar and provides China with an unfair trade advantage in violation of international trading rules, Mr. Bergsten charged.
China vehemently denies that it is a currency manipulator in violation of trading rules and that it engages in unfair trade practices. Premier Wen Jiabao used a rare press conference Sunday to reiterate China's denials and warn other countries against pushing Beijing too hard.
"We are opposed to the position of engaging in mutual finger-pointing or taking strong measures to force other countries to adjust exchange rates," Mr. Wen told reporters in Beijing.
But there was no shortage of finger-pointing Friday in Washington, when Mr. Krugman and Mr. Bergsten spoke at a conference sponsored by the liberal Economic Policy Institute.
Mr. Bergsten described China's intervention in the currency market as "staggering and unprecedented," which Mr. Krugman seconded. Mr. Bergsten estimated China is spending $30 billion to $40 billion per month to keep its currency undervalued.
The International Monetary Fund's rules "are very clear," Mr. Bergsten insisted. "They say, 'Thou shall not competitively undervalue.' With any prolonged, one-way, massive intervention, you are violating the IMF rules of the game," he explained.
He also noted that the preferred approaches of "sweet reason" and multilateralism have not succeeded in persuading China to change its policies.
"If the United States won't itself designate China as a manipulator, how can we expect the IMF to do it?" he rhetorically asked.
By Kathryn Watson - The Washington Times
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