China Under Pressure to Revalue the Yuan.

(From Journal of Japanese Trade & Industry (JJTI))

China is under increasing international pressure to revalue its currency, the yuan. The U.S. trade deficit with China in July jumped 13.5% to $11.338 billion, the largest monthly deficit ever, and some projections put the aggregate U.S. deficit with China for 2003 at $130 billion. The deficit with China has expanded five times over the past 10 years and now accounts for almost a quarter of the total U.S. trade deficit.

Amid growing concerns that the yuan's undervaluation allows Chinese products to flood world markets, causes trade imbalances and boosts unemployment in major economies, the Congress and U.S. industries are stepping up their demand for the Chinese currency's revaluation with support from Japan and European countries. The yuan has become an issue at international meetings as well. The annual meeting of finance ministers of the 21-member Asia Pacific Economic Cooperation (APEC) held in Phuket, Thailand, Sept. 4-5, implicitly referred to the necessity of the yuan's revaluation in the future. A communique adopted at a meeting of Group of Seven (G7) finance ministers and central bank governors in Dubai on Sept. 20 called for flexible exchange rates, practically urging China to widen the yuan's trading band.

But Horst Kohler, managing director of the International Monetary Fund (IMF), has stated that he could not identify himself with suggestions that the world should act in concert to force China to change its currency policy, thus underlining his opposition to collective international pressure on Beijing to widen the yuan's trading band. ...