Wang Calls for Shift in China Growth Model as Trade Surplus Jumps
China’s vice premier, leading annual economic talks with the U.S., signaled internal divisions over his government’s pledge to reduce reliance on overseas demand as the nation posted a wider trade surplus led by record exports.
“The biggest challenge for us in this respect is to make sure that everyone is on the same page,” Wang Qishan said in an interview on the “Charlie Rose” show broadcast on PBS and Bloomberg Television. “We need to come to the same conclusion that we must transform our economic development pattern.”
The remarks, in response to questions on when China might let the yuan rise and take steps to bolster domestic demand, may help explain why officials have limited its gains against the dollar to about 5 percent over the past year, less than half the Singapore currency’s advance. The April trade surplus risks adding to inflation pressures that Treasury Secretary Timothy F. Geithner said could be addressed through yuan appreciation.
“China appears to be absolutely no closer to the hallowed goal of rebalancing” its economy, said Alistair Thornton, an economist at IHS Global Insight in Beijing. The trade numbers “will likely provide a touch more ammunition for the U.S. in the talks, as Geithner argues that more needs to be done with the currency and interest rates,” he said.
The currency is a focal point of talks among Wang, Geithner and other officials from both nations meeting in Washington for the annual Strategic and Economic Dialogue. Geithner, also speaking on the Charlie Rose show yesterday, said China was “moving carefully” in appreciating the yuan and would come to the “right judgment” about continuing to raise its value as a way to fight inflation.
China is continuing its move toward a more flexible exchange rate for the yuan, a U.S. Treasury Department official said today after talks with a top-ranking Chinese delegation in Washington. The official, speaking on the condition of anonymity, said in a conference call with reporters that China had also agreed to revise its procurement policy.
The yuan has risen about 10 percent in real terms because inflation in China is higher than in the U.S. It was 0.02 percent higher 6.4929 per dollar as of 4:06 p.m. Shanghai time. The Shanghai Composite Index of stocks closed 0.6 percent higher.
China reported a more-than-estimated $11.4 billion trade surplus for April, a report from the customs bureau showed today, compared with a surplus of $140 million the previous month and $1.68 billion a year earlier. Import growth slowed to 21.8 percent in April from a year earlier while exports grew 29.9 percent.
U.S. officials want the yuan to rise faster, saying the currency is a big contributor to a record trade deficit with China. The Obama administration and U.S. lawmakers say China’s currency policy gives the nation’s exporters an unfair competitive advantage, costing American jobs.
Wang said his biggest worry about China’s relationship with the U.S. is that economic relations “become politicized” by issues such as the value of the yuan, and said Americans must recognize that much of China’s trade surplus with the U.S. comes from U.S., Japanese and European companies assembling products in China.
“Forget about the exchange rate,” said Wang, who is one of four vice premiers in China’s government and has responsibility for economics, finance and trade. “A large part of our surplus with the U.S. comes from processing trade, and the core components of those exports come from developed countries.”
Senator Sherrod Brown, a Democrat from Ohio, urged the administration to press China on the currency and also said Congress should pass legislation to protect American workers from an undervalued yuan. Brown and Senator Olympia Snowe, a Republican from Maine, have proposed a measure to allow additional sanctions to address currency issues.
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