China says "NO" yet again on currency, but somehow the Obama Administration sees a "YES"
Fact # 1: China continually undervalues its currency, the Yuan, in order to gain an export advantage.
Fact #2: China likes to pretend that it is working toward revaluing its currency in order to forestall any international action.
Fact # 3: China doesn't actually bother to adjust its currency.
Here we go again...
In the wake of this week's G20 meeting in France, Chinese President Hu Jintao rejected calls from world leaders to push for appreciation of China's currency, according to Dow Jones Newswire. Hu rejected any currency appreciation, saying that "asking emerging markets to revalue their currencies and reduce exports will...make sustainable growth impossible." Dow Jones reporter Aaron Back reports that Chinese Commerce Minister Chen Deming believes the yuan has already appreciated to a reasonable level.
Despite what Dow Jones termed "some of the strongest language yet from China," the Obama Administration inexplicably claims to have made progress on Beijing's currency manipulation.
Washington Post correspondent David Nakamura reports that the Obama administration believes China has signaled a willingness to reconsider its currency policy in order to aid global growth. Lael Brainard, the U.S. Treasury undersecretary for international affairs, stated "I think China is recognizing the role of greater exchange rate flexibility in helping to shift to domestic demand."
In response to this pronouncement, Alliance for American Manufacturing (AAM) Executive Director Scott Paul said, "I’ll believe it when I see it."
So, how to reconcile the Obama Administration's inexplicable optimism in the face of a clear and contradictory "No" from Beijing?
China’s currency peg has been a decade-long problem for U.S. manufacturers and workers, and the Yuan remains by most estimates at least 30 to 40 percent undervalued.
China began to float the Yuan in 2005 after an overwhelming Senate vote to sanction it, and began to float it again last year in the face of possible humiliation at the G20 meeting. In both cases, the revaluation was fleeting because the U.S. has never applied real, long-term pressure.
Bottom line: Both the House of Representatives and the Obama Administration must act. It's meaningless to accept Beijing's word. They've head-faked many times before. The only real deterrent will be action, with consequences.