Senior Chinese official says appreciation of RMB not good recipe for U.S.-China trade deficit

Chinese Vice Commerce Minister Zhong Shan is greeted by an unidentified person while attending the breakfast meeting at the U.S. Chamber of Commerce in Washington, D.C., capital of the United States, March 24, 2010. Zhong said on Wednesday that the appreciation of renminbi, the Chinese currency, is not "a good recipe" for solving U.S.-China trade deficit. (Xinhua/Zhang Jun)

WASHINGTON, March 24 (Xinhua) -- A senior Chinese trade official said on Wednesday that the appreciation of renminbi, the Chinese currency, is not "a good recipe" for solving U.S.-China trade deficit.

"U.S.-China trade deficit is caused by the shift in international division of labor and of industries against the backdrop of globalization," said Chinese Vice Commerce Minister Zhong Shan in a speech at the U.S. Chamber of Commerce.


Pressure on China to realign its currency has been growing in the United States. A group of U.S. senators last week proposed a legislation to press China to appreciate its currency, saying the RMB was undervalued.

The bill would require Washington to impose tariffs and other penalties on countries that failed to address the so-called misaligned currencies.

Zhong rejected the accusations in his speech.

"Appreciating the RMB is not a good recipe for solving problems," said Zhong, who will hold talks with his American counterparts on trade issues in the next two days.

He said that the RMB appreciated by 21 percent against the dollar between 2005 and 2008, but China's trade surplus still increased.

China's surplus with the United States grew by 20.8 percent on an annual basis.

Since 2009, the RMB exchange rate has remained reasonably stable, whereas China's overall trade surplus dropped by 34.2 percent and its surplus with the U.S. down by 16.1 percent.

"We believe in the need for reasonable stability not only on the RMB, but also on the U.S. currency policy," said the Chinese trade official.

"A dip in dollar value will undoubtedly bring great repercussions to the global financial system and the world economy," said Zhong. "It is in nobody's interest, China's, the U.S.' or other countries', to see big ups in the RMB or big downs in the dollar."


On the trade imbalance between China and the United States, Zhong admitted that China does run a surplus on goods, but adding that the surplus is gradually thinning.

"We should also note that China has a deficit with the U.S. on services and this deficit continues to widen," he said.

The Chinese government has no intention of going after trade surplus, instead it hopes to see China-U.S. trade in balance and growing in a sustainable manner, said the Chinese official.

The right way for reaching trade balance between China and the U.S. should be expanding exports from the U.S. to China, rather than limiting China's exports to the United States, Zhong said.

To balance the bilateral trade, the Chinese Ministry of Commerce has joined business associations in organizing trade promotion missions to the U.S. with a view to increasing imports and investing more in the United States.

In 2009, over 100 trade promotion events took place in 19 U.S. states, with contracts signed worth billions of dollars.

Zhong urged the U.S. side to take concrete actions to change the export control measures against China.

"When we talk about trade imbalance, there's no turning away from an old issue," he said, adding that the U.S. export control policy against China is "a typical legacy of the Cold War."

"It is not only unfair to China but also has seriously constrained the export of the most competitive U.S. products to China," said Zhong.

As a result, U.S. companies have lost business opportunities in the Chinese market, he noted.

Between 2001 and 2008, the share of U.S. high-tech exports to China decreased from 18.3 percent to 6.9 percent in China's total high-tech imports.

If the U.S. could ease export control to China and kept the 18.3 percent market share, it would export 60 billion dollar extra of high-tech products to China, he said.


Zhong also warned against the rising protectionism in the United States, saying the protectionist moves would hurt both China and the United States.

"China always advocates free trade and opposes protectionism, and we always keep our word," said Zhong.

In 2009, an extremely tough year for China's foreign trade, its import only declined by 11 percent, compared to the 16 percent fall in export, he said.

However in the same year, the U.S. initiated altogether 29 trade remedy investigations against China, involving 7.6 billion dollars of Chinese exports to the U.S.

The number of cases increased by 53 percent and the subject value was 8 times bigger over the previous year, which accounted for a quarter of the global total trade remedy investigations against China and 65 percent of the total subject value, said the Chinese trade official.

"That scenario has caused severe impact on related industries in China," he argued.

To realize the National Export Initiative proposed by U.S. President Barrack Obama, the United States need to work together with other countries to safeguard a fair and free trade environment, and to make the "cake" of international trade bigger.

"If it tries to expand its own exports while push out imports from other countries, its efforts will only backfire and damage everyone's interest," he warned.

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