American suggestions that the Chinese should revalue their currency have fallen on deaf ears.
On Wednesday President Obama spoke of the need “to make sure our goods are not artificially inflated in price and their goods are not artificially deflated in price; that puts us at a huge competitive disadvantage.”
Today however Ma Zhaoxu, a Foreign Ministry Spokesman, said that “wrongful accusations and pressure will not help solve this issue.”
The Chinese currency, the renminbi or yuan, is artificially depressed to ensure that their exports remain affordable. Economists claim that it may be undervalued by up to 40% compared to the dollar.
These policies are proving successful however. Last year, despite global recession, the Chinese economy grew by 8.7%.
Relations between the two countries are currently strained. The recent arms sale to Taiwan, last December’s cyber attacks on American companies, and the Dalai Lama’s up-coming American visit have all contributed to the current tension.
Kenneth G. Lieberthal, who advised Clinton on China policy said “The currency issue has the potential to become a very hot political issue. We’re in significant danger of hitting a very rough patch in trade relations, in the latter part of this year.”