By: Lee Vecchione
This weekend, Premier Wen Jiabao gave his annual news conference where he continued his increasingly defiant tone again the west and criticism of U.S. economic policies. In my report, I discussed the growing threat of China becoming a net seller of U.S. Treasury securities in the coming year after the administration sold $6.4 billion of arms to Taiwan. After Mr. Wen’s news conference and the current push of lawmakers labeling China as a currency manipulator, I am increasingly confident of this materializing.
In his remarks, Mr. Wen said “these moves have violated China’s territorial integrity” and that “the responsibility does not lie with the Chinese side but with the United States.” In addition, he defended China’s currency policy against the U.S. administration’s call to let the yuan appreciate. “We are opposed to the position of engaging in mutual finger-pointing or taking strong measures to force other countries to adjust exchange rates,” said Wen. A global double-dip recession was also discussed in context of continuing high unemployment and sovereign debt challenges within Europe and the United States, which could pose a risk to China not meeting its growth targets in the coming year.
As the drama continues, Tim Geithner must decide to officially label China a “currency manipulator” in his bi-annual agency report due on April 15th. Today, 130 law makers wrote a letter (Lawmaker’s letter on China Currency) requesting for Geithner to designate the manipulator label and to “apply countervailing duty law in defense of American companies who have suffered as a result of the currency manipulation.”
In my opinion, it is time to stop deflecting the blame and take responsibility for our own actions. The U.S. government needs to tighten its own fiscal policy and take concrete steps to construct a credible plan to reduce spending, renegotiate entitlement programs, and promote free markets. The answer is not in protectionism and further monetizing debt as Paul Krugman argues in “Taking On China”.
