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Issue #591

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2014 Media Kit

WTO threat will not yield yuan rise

By: | at 08:00 PM | International Trade  

Threatening China with WTO sanctions will not convince Beijing to revalue its currency, the European Union trade chief said following a meeting with his Chinese.

Chinese Commerce Minister Chen Deming said the yuan was not undervalued and reiterated that China would only adjust the currency’s exchange rate if it were beneficial to its own economy, EU trade commissioner Karel De Gucht said.

“I am quite convinced that they are going to do it for themselves and that openly insisting on it and even thinking about procedures within the WTO ... is not going to resolve the matter,” De Gucht told reporters.

According to World Trade Organisation rules, countries are not permitted to use their exchange rate policies to counteract commitments to open trade. This stipulation about exchange rates has never been tested in practice in a WTO case.

Beijing has locked the yuan in place at about 6.83 to the dollar since mid-2008, trying to cushion its exporters from the global financial crisis.

Some U.S. lawmakers have suggested that President Barack Obama should think about challenging China’s currency policy at the WTO.

House of Representatives Ways and Means Committee Chairman Sander Levin said on Monday that filing a trade complaint at the WTO was one of several options for exerting more pressure on China if it does not resume yuan appreciation in the coming months.

Despite the outside pressure, a constituency within China has been making the case that it is in China’s best interests to resume movement in the yuan exchange rate.

Ba Shusong, a senior economist with the State Council Development Research Center, which advises the cabinet, said in remarks published in the China Economic Times on Tuesday that policy makers should focus more on “making the exchange rate formation mechanism more flexible and marketised.” (Reuters)