Well, China’s decision to allow its currency the renminbi, or yuan, to trade more freely has had what could at best be described as a lukewarm reception.
The currency at one point surged to a record high yesterday after the country’s central bank made the surprise pledge over the weekend to allow greater flexibility for its currency, which had been pegged to the dollar. China had come under growing pressure, including from the United States, to allow its heavily undervalued (by most estimates) currency to float and revalue.
Barack Obama welcomed the move, calling it a ‘constructive step’ that would help boost the global economic recovery, while the European Commission greeted the news with a statement saying: ‘The decision will help achieve more sustainable growth in the global economy, contribute to reduce external imbalances and strengthen the stability of the international monetary and financial system.’Enjoying this article? Click here to subscribe for full access. Just $5 a month.
But a number of US commentators have been much less convinced by the move, including The Diplomat contributor Gordon Chang, who described the decision as a ploy. Writing for The Daily Beast yesterday, Chang said:
‘Despite the signals from the Chinese capital, don’t expect the yuan’s value to change much in coming months. This Thursday, People’s Daily, the Communist Party’s flagship publication, said the renminbi could be overvalued. That statement, simply put, means Beijing might actually try to depreciate its currency.’
He’s also not alone in noting the timing of the announcement—just ahead of this week’s G-20 meeting—and argues that the move was designed to avert international criticism, a point taken up by the Wall Street Journal in an editorial Monday.
Peter Morici, a senior contributor to The Street, went one step further. He argued that the yuan is undervalued by as much as 50 percent against the dollar, and that as a consequence ‘Beijing is hogging growth and jobs and spreading unemployment and budget misery among workers and governments from Sacramento to Athens.’
He added that the US should have been stronger, sooner, perhaps through a tax on dollar-yuan conversion ‘to make the price of Chinese products reflect their true underlying cost.’
And having risen Monday, Reuters notes today that the Chinese currency has actually fallen again, an indication, it says, that a fall had been engineered ‘to make clear its vow of flexibility did not include one-way bets for appreciation.’