The US play a Renminbi blame game - Arthur Kroeber

Arthur Kroeber

The United States are using China's currency, the Renminbi, as a scapegoat to hide its economic problems are created by themselves, argues economic analyst Arthur Kroeber in The New York Times. China is using its currency as a development tool, as so many countries did in the past.

The New York Times:

Arthur Kroeber, managing director of GaveKal Dragonomics, a Beijing-based consultancy, said that when it came to the United States, in particular, “the renminbi is basically a proxy for frustration on two fronts.” 

First, he said, the “vast majority of economic problems in the U.S. are self-created, but that’s an unpleasant truth to recognize and we’d rather blame the Chinese.”... 

Mr. Kroeber agreed that the government’s currency policy mirrored development patterns in Japan, South Korea, Britain and even the United States. 

“My perception is that the currency is part of a development strategy and the Chinese have used that in the same way it’s been used before by other countries,” Mr. Kroeber said.

More in The New York Times 

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

More links on Arthur Kroeber at Storify.

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Two different ways to look at a currency - Arthur Kroeber

Arthur Kroeber

The US and China are at loggerheads again over the way China deals with its currency. It does not help both China and the US have two fundamental different ways to look at their currency, says economic analyst Arthur Kroeber, quoted by the Japan Times.

The Japan Times:

In a carefully argued presentation for the Brookings Institution, Arthur Kroeber, who is based at Brookings Tsinghua center, acknowledged that pressure from the U.S., the International Monetary Fund and World Bank, along with Chinese domestic concerns, had led China to allow appreciation from 2005. But he suggested that there was a gulf in the ways of thinking of the currency issue between the West and Beijing. In the Western view, the exchange rate is merely a price, and therefore consistent intervention by China to set the exchange rate below the market rate is a distortion that prevents markets from functioning properly. It also distorts China's own economy by encouraging investment in exporting industry and discouraging investment in China's consumer market. 

Kroeber notes that China's perspective is different: "Chinese officials see the exchange rate — and prices and market mechanisms in general — as tools in a broader development strategy. The goal of this development strategy is not to create a market economy, but to make China a rich and powerful country. Chinese leaders observe that all countries that have raised themselves from poverty to wealth in the industrial era, without exception, have done so through export-led growth."

More in The Japan Times

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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No market forces for the Renminbi - Arthur Kroeber

Arthur Kroeber

While the US administration is falling short of calling China a "currency manipulator", US fear for the Chinese currency still prevail. In Foreign Policy economic analyst Arthur Kroeber argues why its financial authorities do not trust the markets to set its rates.

China's exchange-rate policy is mainly driven by the aim of enhancing the country's export competitiveness. But other factors play a role, namely a desire to maintain domestic and regional macroeconomic stability, keep inflationary pressures at bay, and force a gradual upgrading of the industrial structure. From Chinese policymakers' point of view, all these objectives suggest that the exchange rate should be carefully managed, rather than left to unpredictable market forces. While economists may argue that long-run economic stability is better served by a more flexible exchange rate, Chinese officials can point to the excellent track record their policies have produced: consistent GDP growth of around 10 percent a year since the late 1990s, inflation consistently at or below 5 percent, export growth of more than 20 percent a year, and a steady increase in the sophistication of Chinese exports. Until some kind of crisis convinces them that their economic policies require major adjustment, China's economic planners are likely to stick with their current formula...

[W]e can reasonably expect rapid growth in the Hong Kong RMB bond market. But the growth of that market, and granting foreigners access to the domestic Chinese government bond market, remain severely constrained by political considerations. Just as Chinese officials do not trust markets to set the exchange rate for their currency, they do not trust markets to set the interest rate at which the government can borrow. Over the last decade Beijing has retired virtually all its foreign borrowing; more than 95 percent of Chinese government debt is issued on the domestic market, where the principal buyers are state-owned banks that are essentially forced to accept whatever interest rate the government dictates. There is absolutely no reason to believe that the Chinese government will at any point in the near future surrender the privilege of setting the interest rate on its own borrowings to foreign bond traders over whom it has no control. As a result, it is likely to be many years before there is a large enough pool of internationally available safe RMB assets to make the RMB a substantial international reserve currency.

Much more arguments and facts in Foreign Policy. Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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American fear and anger towards China - Shaun Rein

Shaun Rein by Fantake via Flickr

Shaun Rein is shocked by the American fear and anger towards China, including the misplaced rethoric against China's currency, he reports in CNBC. "Many attribute China’s boom as a result of stealing American jobs and intellectual property, rather than efficient economic policies and hard work ethic."
Shaun Rein:

America needs to get more competitive at manufacturing to reduce our overall surplus, not blame China’s currency policies. Trade patterns are far more inelastic than many economists believe.
In fact, more than 70 percent of big American multinationals operating in China told my firm they did not want the renminbi to appreciate too much because it will cut into their profits. The majority also said they would increase costs to the American consumer or move to cheaper production areas if it rose.

More in CNBC, including Shaun Rein debate with American Secretary of Commerce Gary Locke.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch. 

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Scary China bubble develops in the US - Shaun Rein

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Import into China is growing, the Renminbi might slight appreciate after the Christmas shopping is done and the government is addressing overheating in real estate, tells Shaun Rein Bloomberg. But the real problem is the China IPO bubble developing in the US. (Clip at the bottom of this message).

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Shaun Rein is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

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US companies oppose rise of the Renminbi - Shaun Rein

Shaun Rein by Fantake via Flickr

US congress and other political bigwigs might be pushing China to appreciate its currency, but Shaun Rein asked US companies, and they see their interests hurt by a rise of the Renminbi, he writes in Forbes:

The next time you hear someone in Congress push to appreciate the renminbi, ask them why they would want to make prices higher for everyday Americans at Wal-Mart and take away profits for American workers when they need it most. That endangers America's economy as well as China's.

Yes, you are reading this correctly: a rise of the Renminbi hurts US interests. Shaun Rein recalls a recent meeting with the president of one of his clients:

I asked him what he thought about Congress pushing for appreciation of China's currency, the renminbi, or yuan. His immediate answer: "It would be the worst thing for my company." (His company is 100% owned by Americans, by the way.) First, he said, an appreciating renminbi cuts into his company's profits, which lowers bonuses, salaries and dividends for employees in the U.S. Why would anyone want to lower the profits of American companies during a financial crisis?

Second, an appreciating renminbi also would not save American jobs, he argued: "That saving American jobs argument is ridiculous." Companies would "transfer production to lower-cost places like Vietnam or Indonesia.

More in Forbes, including observations on the threat of a trade war.

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Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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