• by Antoaneta Bezlova (beijing)
• Wednesday, October 07, 2009
• Inter Press Service

As the United States talks about rebalancing global growth, China sees a covert agenda of trade protectionism. And while Beijing seems to agree that there is a price to pay for its new ascent as a global power, it bristles at suggestions that it needs to let its export powerhouse fade from prominence by allowing its currency, the yuan, to appreciate faster.

Recent high-profile meetings of the Group of 20 in Pittsburg and the weekend annual gatherings of the World Bank and the International Monetary Fund (IMF) in Istanbul have provided a stage for cross talking between the United States and China, illustrating how far apart their agendas about helping shore up the world economy’s recovery remain.

True, the Pittsburg summit in late September produced a pledge by both rich countries and fast-growing powerhouses to rethink their economic policies, and reduce imbalances between big exporting nations such as China and Japan and debt-laden countries like the United States, which has long been the leading global consumer.

But U.S. President Barack Obama’s calls on China to reduce its dependence on exports by promoting more consumer spending have caused experts here to see hidden agendas.

'Washington is talking about decoupling and rebalancing the global economy but the true nature of these pursuits is the United States’s scramble for markets,' Chen Fengying, an expert on world economic issues with the China Institute of Contemporary International Relations, a think tank that advises the government, told the ‘China Times’ daily.

Chinese experts believe that Obama’s eyes are set on making exports the new economic engine for the faltering U.S. economy, and his pronouncements about addressing global imbalances aim to arrest further expansion of China’s export powerhouse.

Broad government support for Chinese exporters, along with stimulus spending and record bank lending, has been among the factors that drove the country’s economy to expand at an annualised rate of 14 percent in the second quarter of the year. By contrast, the U.S. economy shrank at an annual rate of 1 percent during that period.

Beijing has intervened heavily in currency markets to keep the value of its currency down, thus providing its exports with a competitive edge in the current weakened economic climate. China’s liberal support for its exporters has led to frictions with its trade partners, particularly with the United States.

A full-blown trade row erupted between the two countries in September after Beijing accused Washington of 'rampant protectionism' for imposing heavy duties on imported Chinese tyres and threatened action against imports of U.S. poultry and vehicles.

In signing the order subjecting Chinese tyre imports to 35 percent duty on top of the existing 4 percent, Obama sided with America’s trade unions, which have complained that a 'surge' in imports of Chinese-made tyres had caused 7,000 job losses among U.S. factory workers.

China’s minister of commerce Chen Deming told the media that Obama’s decision was sending 'the wrong signal to the world' at a time when Washington and Beijing should be cooperating with each other to deal with the worst economic and financial crisis in decades.

China has glowed in the global consensus that the economic crisis had accelerated its emergence as an established centre of power. In Pittsburg the group of rich industrialised countries agreed that decisions on global economic issues in the future will have to include important players among emerging economies like China and India.

Speaking from Istanbul where the World Bank and the IMF held their annual meetings over the weekend, World Bank president Robert Zoellick said the crisis had brought the curtain down on the unipolar world that followed the collapse of communism 20 years ago.

In the future, he said 'there will certainly be a larger role for the emerging powers, there will be multipolar sources of growth, there will be more south-south trade between developing countries.' He went on to predict that the euro and the Chinese yuan, formally known as the renminbi, will join the U.S. dollar as reserve currencies.

But while agreeing to share power with emerging economies, the G7 policymakers — from seven industrialised countries in the world, including the U.S. — have continued to lobby Chinese leaders to address skewed global flows in trade and investment by letting the yuan appreciate faster.

'We welcome China’s continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the renminbi in effective terms and help promote more balanced growth in China and the world economy,' the G7 said in a statement in Istanbul.

China’s official position though has been that its currency policies cannot be blamed for the lopsided trade flows and the world economy’s imbalances. Marking 60 years of communist rule last week, Chinese premier Wen Jiabao told the nation and the world that Beijing intended to contribute to a global recovery by maintaining the continuity and stability of its policies.

'What is the new economic balance really depends on who is speaking,' said markets analyst Sun Miaoling. 'From the U.S.’s point of view, it means rapid increase in both exports and savings. For Beijing, it means the lifting of restrictions on U.S. high technology exports to China but also renewed vigilance on the way trade protection clauses are being used.'

© Inter Press Service (2009) — All Rights Reserved. Original source: Inter Press Service

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