Your woes are not our fault, China tells US

We have been made a scapegoat to please voters ahead of the mid-term elections

“The actions and criticism against China makes no sense,” Huo Jianguo, director of Chinese Academy of International Trade & Economic Cooperation, a Ministry of Commerce think-tank, told China Daily in an interview.

He said the Obama administration had made China a scapegoat to please voters ahead of mid-term elections.

The comments follow US Treasury Secretary Timothy Geithner’s promise to rally other world powers to push China for trade and currency reforms.

China’s central bank said in June it would let the currency fluctuate more freely. Since then it has risen 1.53 per cent, but many economists say it is undervalued by up to 40 per cent.

China’s government could not have let the yuan appreciate faster because of China’s own economic situation, Huo said. In the longer term, the yuan would rise against the dollar.

Hold no water

“The US moves do not hold any water and China must come out strongly against them,” he said.  Zhang Monan, an economist with State Information Center, a top government think-tank, said the United States gained more than China from their relationship as the world’s biggest debtor and the world’s biggest creditor.  “Ironically, being the largest debtor nation has not restrained the mammoth that is the US. instead, its huge debt has been used as an effective apparatus to maintain and extend Washington’s decades-old global financial hegemony,” she wrote in a commentary in China Daily.

She said the United States was able to take advantage of the dollar’s falling value and the currency’s dominant position in international financial transactions to cut the country’s foreign debts.

“From 2002 to 2006 alone, an accumulated $3.58 trillion worth of US debt evaporated because of the Federal Reserve’s increased issuance of the dollar or the decision to devalue the greenback as the world’s leading reserve currency.”

At the same time, US investments overseas earned much more than the 3.5 per cent average return ratio that foreign creditors got from 10-year U.S. debts, she said. “Compared with the advantage the US enjoys in the global financial scope, China is still not a credit power in the real sense despite its status as the world’s largest creditor nation. It is more like a depositor that puts its enormous funds into the bank only to gain a low interest, before borrowing from (the) bank by paying a much higher rate.”