Wen Jiabao: May be preparing ground for major policy shift.
Wen Jiabao, China’s premier, has had a lot to say about US treasury bonds and the relative value of the yuan lately. Perhaps he misses his strategic economic dialogue with former treasury secretary Henry Paulson. The new team in Washington must seem rude by comparison.
Even before he was confirmed as Paulson’s successor, Timothy Geithner accused China of manipulating its currency and said the Obama administration would push aggressively for changes in China’s policies. “No other country can put pressure on our country to depreciate or appreciate the renminbi,” Wen told reporters following the closing meeting of the National People’s Congress in Beijing last month. The renminbi is literally “the people’s currency.”
With the Chinese premier’s recent pronouncements, US-China relations seem to be taking a dangerous turn for the worse. “To be honest, I am a little bit worried,” Wen said in discussing the safety of China’s massive US assets. He requested that the US maintain its good credit, something that is of deep concern to China, given the Asian exporter is the largest foreign holder of US public debt. The US can ill afford to lose its biggest creditor at a time of global financial crisis and massive borrowing needs to support economic stimulus.
The US Treasury Department is scheduled to release its annual report of the currency practices of trading partners on April 15, but the report is often delayed. (The IRS, for one, is busy that day.) Analysts say it is unreasonable to expect the Treasury to cite China as a currency manipulator. If it does, though, it won’t take long for Wen to react. He may already be preparing the ground for a major policy change toward the US. Protectionism may prolong the global recession, but China’s potential turn inward could make it a stronger, better-balanced economy with 1.3 billion consumers of its own.