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November 21st 2008

US to Continue to Pressure China Over RMB

After rising nearly 20% over the last three years, the RMB has virtually stopped appreciating against the US Dollar, perhaps as a result of the credit crisis. At the same time, the US exports sector- previously one of the few bright spots of the sagging economy- has begun to stall. US Politicians have taken note, and are now renewing their efforts to persuade China to allow its currency to rise further. They are also agitated about China’s perpetually growing forex reserves (currently estimated at $2 Trillion), which are increasingly being deployed in sensitive areas. Meanwhile, the Chinese economy is growing at the slowest pace in years, and the Chinese government is resorting to desperate measures to prop it up. In short, allowing the RMB to rise, while placating US policymakers, is tantamount to economic suicide, and hence unlikely.

While other sovereign wealth funds have existed for nearly 50 years without controversy, "China appears far less likely than other nations to manage its sovereign wealth funds without regard to political influence that it can gain by offering such sizable investments."

Read More: US panel urges action on China currency, investing

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One Review of “US to Continue to Pressure China Over RMB”

  1. Mike Says:

    Flexibility and free economy is an answer for the Chinese, I think. I understand they have been allowing their form of capitalism in the passed few years, however, releasing it to float on its own might be the best thing for China. I do not wish to see the Chinese people suffer because of this and by pressuring the chinese in ways that could challenge their economic system today, I find it wiser to simply talk them into freeing up their economy to the fluctuations of the world.

    My wife is working as a salesclerk in China. She is retired from a teaching position and to alter things drastically might cause bigger problems for her and myself than the highly visible talkingheads in Washington and elsewhere.

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