Competitive devaluation competition

23 September 2010 By Ian Campbell

China must revalue the yuan, says America. Chinese premier Wen Jiabao dislikes the message and is talking down expectations. But the dollar is cheap against the euro, yen and many Asian currencies. Compromise is needed: China should let the yuan rise, the U.S. should be patient.

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Wen Jiabao, China's prime minister, is due to meet U.S. President Barack Obama in New York on Sept. 23. In a speech on Sept. 22, Wen said that the "conditions for a major appreciation" of the yuan "do not exist".

The main reason for the US bilateral trade deficit with China, he said, was "the structure of trade and investment between the two countries."

A House of Representatives committee is set to vote on Sept. 24 on a bill that would penalise China if it does not allow the yuan to rise more. A Democratic Party source said that the full House is expected to vote on the bill next week.

The dollar traded as low as $1.34 per euro on Sept. 23, a fivemonth low against the European currency.

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