Billionaire investor George Soros said he shared concerns about a “currency war” and China must do more to accept its responsibilities in the global monetary system.
“I share the growing concern about the misalignment of currencies,” Soros wrote in an article for the Financial Times. “Brazil’s finance minister speaks of a latent currency war, and he is not far off the mark. It is in the currency markets where different economic policies and different economic and political systems interact and clash.”
China this week stiffened its opposition to a rapid appreciation of the yuan, with Premier Wen Jiabao saying his country will stick to its policy of gradually increasing the currency’s flexibility and lashed out at European Union leaders for teaming with the U.S. to pressure his government.
China’s case may be bolstered by the recent willingness of Japan, Brazil, Switzerland and other nations to temper the strength of their currencies through intervention.
The world’s second-largest economy remains the target of the greatest criticism. Even as it boasts the fastest-growing major economy, it has limited the yuan’s appreciation to about 2 percent versus the dollar since pledging in June to make it more flexible.
“Whether it realizes it or not, China has emerged as a leader of the world,” said Soros. “If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the global economy with it.”
U.S. impatience with China boiled over on Sept. 29 when the House of Representatives passed a measure that would let American companies seek import duties to prevent Chinese manufacturers from using an artificially weak yuan as a competitive tool. The measure won’t go to the Senate until after U.S. congressional elections in November.
Even so, a U.S. solo run may be counterproductive, Soros said. “Currency adjustments must be part of an internationally coordinated plan to reduce global imbalances.”
International Monetary Fund Managing Director Dominique Strauss-Kahn yesterday dismissed chances of a return to the currency accords of the 1980s. International exchange-rate diplomacy shifts into high gear at tomorrow’s Group of Seven meeting in Washington