In a surprising bout of candour, United States President Barack Obama lashed out at Chinese authorities over the alleged undervaluation of the Yuan, saying most economists estimated it was devalued by 20 to 25 per cent and that it was time for China to move towards a market-based system for their currency.
Speaking at the end of the Asia-Pacific Economic Cooperation organisation meeting in Hawaii, Mr. Obama poured scorn over China for breaking some rules and implied that it was trying to game the system.
“The problem is, is that you've got a bunch of export producers in China who like the system as it is, and making changes are difficult for them politically. I get it. But the U.S. and other countries, I think understandably, feel that enough is enough,” said Mr. Obama.
“Play by the rules”
He underscored his intention to ensure that China played by the rules of the game, especially since, in addition to the currency valuation issue, intellectual property rights and protections for U.S. companies in China were also proving problematic.
“We are going to continue to be firm in insisting that they operate by the same rules that everybody else operates under. We do not want them taking advantage of the U.S. or U.S. businesses,” he said.
While the U.S. has made its concerns about the alleged undervaluation of the Yuan known for several years now, China has repeatedly said the issue is a red herring and that the U.S. economic woes stem from deeper, domestic causes.
The U.S. Senate last month passed a bill, the “Currency Exchange Rate Oversight Reform Act of 2011”, aimed at punishing China for allegedly manipulating its currency and holding it at an artificially low level.
Yet that bill came under fire even from Republican Party leaders, who are often on the front foot when it comes to critiquing Chinese monetary policies. John Boehner, the Speaker of the House, denounced the bill a day after it passed the Senate, saying it posed a “very severe risk” of starting a trade war between the world's two biggest economies.
Earlier this year Chinese President Hu Jintao deflected criticism away from China's currency, suggesting instead that efforts by the U.S. Federal Reserve to stimulate growth through huge bond purchases were fuelling inflation in emerging economies.