While admitting that an undervalued Chinese renminbi does affect India in some respects, New Delhi has made it clear that it is “not convinced by the claim” that Beijing's strategy of allowing its currency to fluctuate in a narrow band is the only reason for the global economic crises.
“An undervalued Chinese currency is one factor in the current world economic crises. There are a series of other issues apart from currency rate. We don't want the world to take such drastic steps that they destroy economic recovery in the developed world. We would like to deal with currency issues within a larger architecture. This [Chinese currency reforms] is not a one shot answer to the problem,” sources said here on Sunday. The advantages of an undervalued yuan to India were that imports were cheaper and prices were kept down. On the other hand, Indian manufacturers feel it affects their competitiveness domestically and overseas.
The observations come weeks before the G-20 summit in Seoul amid reports in western media proposing an alliance to force China to fix its currency at “realistic” levels. The reports have also suggested that the basic reason for the economic crises was the “unrealistic low value” of the yuan.
The sources refuted both arguments and pointed out that the renminbi had in fact appreciated by 22 per cent against the dollar in the last four years. “We [the world community] should fix the economic problem in a cooperative manner rather than raising one issue and choosing sides.”
For India, non-tariff barriers to its exports into China was a major issue. India wants China to address non-tariff barriers relating to exports of IT services, agricultural commodities, heavy engineering and pharmaceuticals. “Otherwise how come our businesses are competitive in the rest of the world and not in China? We have been talking on this and the Chinese have promised to something about it,'' they added.