Foreign and Military Affairs

RMB appreciation not recipe for US trade deficit

(Xinhua)
Updated: 2010-03-24 22:55

WASHINGTON - A senior Chinese trade official said on Wednesday that the appreciation of renminbi, the Chinese currency, is not "a good recipe" for solving US-China trade deficit.

"US-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 US Chamber of Commerce.

Pressure on China to realign its currency has been growing in the United States. A group of US 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 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 US down by 16.1 percent.

"We believe in the need for reasonable stability not only on the RMB, but also on the US 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 US' or other countries', to see big ups in the RMB or big downs in the dollar."