US Economist Says China Could Act on Yuan if US Quiet

Reuters
23 March 2010

China will have more scope to allow its currency to appreciate if the U.S. government adopts a low-key stance on the issue, a Harvard University economist who also advises the U.S. government on economic policy said.

“If the U.S. Congress and the Treasury don’t talk about the Chinese manipulating their currency, if the U.S. can be quiet for two months, then I think the Chinese will be able to say that because of the great strength of the Chinese economy … they are unilaterally raising the value of the RMB,” said Martin Feldstein, a member of U.S. President Barack Obama’s economic recovery board.

Feldstein was speaking at the Credit Suisse Asian Investment Conference in Hong Kong on Tuesday.

Tensions over China’s currency practices have grown increasingly acrimonious after U.S. lawmakers threatened to impose trade tariffs unless Beijing allowed the yuan to rise.

China has kept the yuan on ice near 6.83 per dollar since mid-2008 to help its exporters ride out the global credit crunch by making their goods cheaper abroad.

“With the politicization of the issue, it’s more difficult (for the Chinese government) to take economic decisions separate from politics,” said Laura D’Andrea Tyson, another Obama advisor speaking at the same event.

Separately, Feldstein said the strength of the U.S. dollar against the euro was only temporary, adding that the euro remained the only major alternative to the dollar.

The euro hit a three-week low of $1.3464 on Monday amid concerns about Greece’s debt problems, but rebounded to $1.3554 on Tuesday.

In addition to his role as an advisor to Obama, Feldstein is also president emeritus of the National Bureau of Economic Research.

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