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US President Barack Obama's pressure on China over its currency's exchange rate is a manifestation of hypocrisy from the West and will not work, a British economist has said.
"The president is playing with fire... Obama really should tread carefully. At the same time, the United States is now at risk of sparking what could be an all-out trade war," said Liam Halligan in an article carried by this week's Sunday Telegraph.
Halligan, chief economist at Prosperity Capital Management, predicted that China will not yield to US pressure on the issue.
"Beijing will eventually allow the yuan to rise, but in its own time and in order to tackle inflation and not because of US pressure."
Chinese inflation is now at 2.7 percent, close to the official 3-percent control target, he noted.
Halligan argued that the Chinese yuan may not be under-valued as much as Western politicians have perceived.
Although Chinese exports rose by 46 percent in the first two months of 2010, the rise is from a very low base -- with February 2009 being the epicenter of the US-sparked sub-prime storm, he noted.
He also pointed out the fact that China's trade surplus dropped by 51 percent in the same period. That means China's gain in exports were out-weighed by an import surge.
"This hardly suggests the yuan, as (US Treasury Secretary Tim) Geithner claims, is 'way too low'," said Halligan.
Geithner said in January that Obama believed China was manipulating its currency.
On Obama's latest call for China to adopt a more "market-oriented exchange rate," Halligan said Washington is actually the biggest currency manipulator in the world.
"The reality is that America's 'weak dollar' policy -- its long-standing practice of allowing its currency to depreciate in order to lower the value of its foreign debts -- amounts to the biggest currency manipulation in human history."
Halligan also noted that Washington has for years "shamefully stalled" on various rulings of the World Trade Organization that showed America to be breaching global trade rules.
"America needs to act smarter and get its own economic house in order. Obama has decided instead to lash out at China in a desperate attempt to placate a US electorate increasingly mindful of their president's failings," said Halligan.
The economist said Western politicians' blame game against emerging markets over the current global imbalances reflects their hypocrisy and lack of character.
"It's always easier to blame someone else for your failings... The Western world's response to this self-made 'credit crunch' has highlighted the hypocrisy of our so-called leaders, their refusal to face reality and, above all, their lack of character," he said.
"The implication (of statements of Western politicians) is that sub-prime, and the deepest Western recession in generations, wasn't our fault. It was entirely unrelated to widespread financial fraud, political myopia and lax regulation," Halligan scorned. |
