May 18, 2005
Babu Ghanta
India Daily
When a country becomes rich, it cannot behave like it is poor. Going after Western trade, trade surplus and increasing foreign exchange reserves mean something. China (and India to some extent) need to understand that their artificially lowered currency values is hurting America. For the sake of fairness, China and to some extent India needs to revalue their currency. Excessive trade surplus with America really means exploiting America as a nation and taking advantage of the naivety and kind gestures of Americans.
How would China or India feel if all their jobs go to another country because that country maintains an artificial low currency value?
The US Treasury, in its twice-yearly report to Congress on exchange rates and trade, stopped short on Tuesday of accusing China of currency manipulation but made clear it expected revaluation within six months.
The conclusions sparked an angry reaction from those legislators who have lost patience with the Treasury's gentle diplomacy on China's exchange rate. The report, however, marked a clear hardening by the administration. It said: “If current trends continue without substantial alteration, China's policies will likely meet the statute's technical requirements for designation [for currency manipulation].”
Seeking to cast the problem in terms of global imbalances, rather than the bilateral US-China relationship, it said: “The fixed exchange rate that China now maintains is a substantial distortion to world markets, blocking the price mechanism and impeding the adjustment of international imbalances.”
John Snow, US Treasury secretary, said China had made ample preparations for a shift in its currency regime, and there was no excuse for further delay.
China will be required in six months to make their currency flexible and revalue their currency. India should also do the same voluntarily to a lower extent. Both India and China should say to the world – we are richer today; we do not need artificial currency manipulation.
http://www.indiadaily.com/editorial/2758.asp