Fast yuan moves will bring disaster: report

BEIJING (BestGrowthStock) – Forcing China to increase the value of its currency too quickly will cause damage throughout the global economy and ultimately bring disaster to the world, a leading official newspaper said in an editorial on Thursday.

If the yuan appreciates too quickly, it will put unbearable pressure on Chinese exporters, leading to price rises overseas and factory closures at home, Communist Party mouthpiece the People’s Daily said in its overseas edition.

That would affect the faltering global economy recovery, it added.

“Consumers would have to bear a high price, which would deal a blow to global trade flows and be extremely disadvantageous to the consumer demand on which the world economy so desperately needs,” the newspaper wrote.

“If the renminbi exchange rate is not stable, companies will not be stable, employment will not be stable and society will not be stable,” it added.

“If there are problems in China’s economy (Read more about the fastest growing economy.) and society, this will be a disaster for the world.”

China freed the yuan — formally known as the renminbi, or “people’s currency” — from a 23-month peg to the dollar in June and has let it gain about 2.8 percent against the dollar since then, with most of its rise coming after August.

Chinese exporters could withstand further yuan gains of almost 6 percent against the dollar before they start losing money, a Reuters poll at the country’s top trade fair showed.

U.S. and European officials have criticized the pace of appreciation as too slow, but Beijing won something of a reprieve last week when the U.S. Treasury Department opted to delay a decision about whether to label China a currency manipulator.

The People’s Daily said such demands for appreciation were akin to “using ones’ neighbors’ fields as a drain,” an aphorism meaning to shift ones’ troubles onto others.

“During the battering of the global economic crisis, some countries in Europe as well as the United States … ‘use their neighbors’ fields as a drain’ for their own national interest, pushing trade protectionism and putting pressure on the renminbi’s exchange rate,” it wrote.

“The end result will stymie the global economic recovery and growth,” the editorial said.

But pressure on the yuan to appreciate will likely abate as China’s trade surplus narrows, the newspaper pointed out.

“Over the long term, our trade surplus will continue on a downward trend, and so there is the expectation that international pressure for the renminbi’s rise will reduce.”

(Reporting by Ben Blanchard; Editing by Jacqueline Wong)

Fast yuan moves will bring disaster: report