China has poll breather on yuan
pressure By Tim Brown
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BEIJING - Pressure is picking up once more
on China to appreciate its currency at a faster
rate, with a call by the Group of Seven of leading
industrialized nations for more efforts to
strengthen the yuan echoed last Thursday in
Beijing by International Monetary Fund managing
director Dominique Strauss-Kahn. On the same day,
Bloomberg reported that China had surpassed Canada
to become America's largest importer.
The
elevation of China's trading position and non-US
demands for a stronger yuan lend support to
advocates of revaluation of the
currency in Congress, which
last summer debated legislation to increase
pressure on Beijing to move faster in this
direction.
"The trade numbers that came
out today and which show another record deficit
with China is further evidence that this problem
is getting worse and not better," said Ohio
Democratic Representative Tim Ryan, a co-sponsor
of currency legislation.
The debate in
Congress may well return to prominence on Capitol
Hill, given three other big China-related stories
from last week - US allegations of espionage,
Steven Spielberg's high-profile resignation from
involvement with the Beijing Summer Olympic Games
to be staged in August, citing the country's
policies on Darfur, and questions over the safety
of a drug compound shipped from China to the US
for the manufacture of heparin.
Yet the
Chinese government still has some breathing space
before it will be threatened by the effects of any
legislation, which is unlikely until after the new
president is sworn into office next January 1. The
George W Bush administration is unlikely to agree
to it; nor is any meaningful legislation likely to
muster the two-thirds majority needed to override
a presidential veto.
The administration's
leader on the issue, US Treasury Secretary Henry
Paulson, testified before the Senate Budget
Committee this month that the effort to pass yuan
legislation was "bordering on the silly". He
expressed his desire for appreciation to occur
more quickly, but countered this expression with
the realization that "the rate of appreciation of
the currency roughly doubled last year to 6.7%".
The administration has been just as
consistent in its efforts to squelch legislation
as Congress has been in promoting it.
And
why now, or at any time before Bush leaves office,
should the administration make a deal with
Congress? Bush will not be in office 10 months
hence. The fact that the timetable for
favor-swapping is dwindling means that
favor-swapping is less likely to occur.
Prospective future favors are becoming a
non-issue. In other words, the idea that "tomorrow
will be brighter because of the deals I make
today", doesn't make much sense.
The only
reason for the administration to compromise on
yuan legislation would be that it would receive a
commensurate "gift" from Congress. Congressional
politicians prefer to trade favors with the newly
elected popular president coming into office,
rather than with the less-popular president
exiting it.
According to Dr Gregg Johnson,
assistant professor of political science at the
University at Buffalo, "A newly elected president
claims to have an electoral mandate to pursue the
policies he or she advocated during the campaign.
Legislators are more willing to stand up for these
policies and less likely to resist them when the
president is seen as popular, like they are during
their first year in office. The most obvious
example of this is FDR's [Franklin D Roosevelt's]
First 100 Days legislation that was designed to
ameliorate the causes of the Great Depression.
"President Bush lacks standing as a 'lame
duck - he's in his last year and cannot run for
reelection - and, barring a real meltdown of the
US economy, Congress is unlikely to pass anything
negative before November's election."
Johnson further noted that neither the US
nor China "has strong short-term incentives to
push too hard on the topic. The US relies on China
and other nations to cover its enormous budget
deficit (as well a private sector debt) and China
relies on the US as its largest export market. We
are too economically interdependent to really push
each other too hard on this topic."
Lending further credence to the likelihood
that a bill will not be passed until a new
president takes office is the fact that no major
US newspaper wrote on Thursday about China's
recent usurpation of Canada as America's number
one source of imports. People in the US are not
really talking about this story and other
China-related concerns. They're talking about the
presidential elections.
Of course, it
would be assuming too much to say for certain that
a yuan bill won't be passed on Bush's watch.
However, if history is any measure, that is the
likely scenario. As China's first great historian
Sima Qian (ca 145-90 BC) noted, "Those who do not
forget the past are the masters of the future."
Tim Brown is a freelance
reporter based in Beijing. He can be contacted
at tim.brown100@yahoo.com
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click here if you
are interested in contributing.
(Copyright 2008 Asia Times Online Ltd. All
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