An international clamour for China to revalue its currency has hit a nerve!
The Chinese feel they are under attack and have likened the nation to the blue-skinned heroes of James Cameron’s 3D blockbuster Avatar – fending of Earth’s troops who plan to destroy the Tree of Souls on Pandora.
But the hurt is not only fictional – it appears the Chinese have a long memory and haven’t forgotten China’s humiliation at the hands of imperial powers in the 19th century.
As every Chinese citizen knows, China was bullied for a century, starting with the Opium Wars. We well remember the "unequal treaties" that allowed the British to drain the imperial coffers of the Qing Dynasty (1644-1911) in return for opium. The sales of looted artifacts continue to remind us of the sacking of the Old Summer Palace and the half-century of abuse that followed.
The Chinese people expect their leaders to continue to act in the nation's best interest. When economic factors indicate it is time to re-value the yuan, they will. But until then, no amount of bullying or blackmail should make them budge.
The commentary comes as the US lawmakers introduced legislation this week that would determine if China’s currency is under valued – making Chinese products cheaper to export. On April 16 – the US will determine if China is a “currency manipulator” at which point there is no turning back – President Obama will be forced to slap duties on Chinese goods.
China’s leaders have already made it clear they won’t succumb to “bullying” – so the effort of US lawmakers are proving to be counterproductive. The Chinese feel they are being blamed for the financial crisis designed and engineered on Wall Street.
So the question is: is the yuan undervalued and is China gaining an unfair advantage. And this is where many economist are split. The Peterson Institute for International Economics estimates it is by as much as 40 per cent.
And finally I’ll leave you with this, which suggests China is rightly aggrieved, as the final word on this subject for now. A Bloomberg article paraphrases some comments from Goldman Sachs' Chief Economist Jim O’Neill.
US lawmakers are playing political football by pressing China to boost the value of its currency, which isn’t particularly undervalued... The concern in Congress “is sort of understandable but it misses the point,” O’Neill said. It’s “the equivalent of a football” and is part of “the usual hobby of bashing China.”
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