- The Washington Times - Monday, December 8, 2003

Chinese Prime Minister Wen Jiabao, on a tour of Wall Street yesterday, deflected White House assertions that China pegs its currency to the dollar to gain an unfair advantage in trade, though he held out hope the dispute could be “ironed out gradually.”

President Bush, under pressure from voters who increasingly blame China for the loss of millions of manufacturing jobs, is expected to repeat his calls for a revaluation of the Chinese currency in a meeting with Mr. Wen today.

But Mr. Wen argued in a speech to New York banking executives that the best way for the Asian and American economic powers to resolve this and other contentious trade issues is to increase trade and negotiations.

He said China will increase purchases of American soybeans — a $2 billion a year U.S. export market — and called on the United States to lift its restrictions on sensitive high-technology exports such as satellites to help reduce its record $120 billion trade deficit with China.

“Let me assure you that I have come to this country to seek friendship and cooperation and not to fight a trade war,” Mr. Wen said. “One should not long expect the Chinese people to only take your Boeing planes and eat your soybeans,” he said, noting that numerous American products from McDonald’s hamburgers to Kodak film already are popular with the Chinese and more could be.

Mr. Wen’s speech came as the White House prepared for a full day of talks with the Chinese leader on a broad range of issues. In acknowledgment that any immediate move by China to devalue its currency would be destabilizing without first restructuring its shaky banking sector, the Treasury is setting up a working group with China in January to negotiate the issue.

The talks with China are at a particularly delicate time as the dollar has been dropping rapidly against most major currencies except the Chinese yuan. It reached a record low of $1.22 against the euro yesterday on concerns that the Federal Reserve, which meets today, will not raise interest rates anytime soon to support the dollar. Some are calling on the administration to take steps to stop the dollar’s precipitous decline.

America’s trade deficit with China — the largest with any nation — grew rapidly in the past three years at the same time a prolonged manufacturing recession led to the loss of 2.7 million factory jobs in the United States.

Increasing pressure from voters has prompted some members of Congress to threaten steep trade sanctions on China unless it drops its peg to the dollar. The yuan by some estimates is overvalued by as much as 40 percent, giving the Asian giant a substantial advantage in trade.

Mr. Bush last month imposed tariffs on lingerie imports from China, and is considering a petition by U.S. furniture makers to levy tariffs of as much as 440 percent on $1 billion a year of bedroom sets from China, where factory workers earn a fraction of what American workers earn.

“The cost of labor in the U.S. is very high,” Mr. Wen said. “The reason for such a rapid growth in China-U.S. trade lies, in the final analysis, in the high degree of complementarity of the two economies, which, to a large extent, stems from their big differences in economic resources, economic structures and consumption levels.”

Mr. Wen said that blocking Chinese exports won’t help the United States add jobs or cut its trade deficit, since most of the goods that come from China are not made in the United States and they would have to be imported from elsewhere.

He emphasized that keeping the doors open to business with China is good for American companies. More than 400 of the top 500 U.S. companies “have come to China, and most are making a handsome profit,” he said. “Of every 10 rolls of film used by Chinese customers, seven are made by Kodak.”

McDonald’s and KFC restaurants are in almost every city, he said, while goods made by Microsoft, Intel, Motorola, Procter & Gamble Co., and General Motors Corp. “sell quickly on the Chinese market.”

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