Q: The U.S. Treasury Secretary emphasized the importance of China-U.S. economic and trade relations in a recent testimony to the U.S. Senate and spoke positively of China's increase of imports from the United States. He also said that distortions caused by China's exchange rate spread far beyond China's borders and reforms are essential to the American and the global economy. Some U.S. congressmen claimed that the RMB was seriously undervalued and the Congress will pass legislation in the near future that would impose trade sanctions on countries with "fundamental currency misalignment". How do you comment?
A: We agree with the view that the China-U.S. economic and trade relationship is very important. It is a basic fact that the China-U.S. economic and trade relationship is in essence win-win and mutually beneficial. China is not after trade surplus with the U.S. and has taken active steps to expand its imports from the U.S. and push for a sound and balanced development of the bilateral trade. Just as the U.S. Treasury Secretary said at the Congressional hearing, export of U.S. goods to China in the first quarter of this year rose almost 50% compared to the same period the year before while export of US goods to the rest of the world grew by less than 20%.
Numerous facts have proven that RMB exchange rate is not the major cause of the trade imbalance between China and the U.S. Since the reform of China's exchange rate formation mechanism in July 2005, the RMB has appreciated by 21% against the U.S. dollar in cumulative terms. However, there has been no apparent improvement in U.S. trade deficit with China during the same period. The trade imbalance between the United States and China is mainly attributable to international division of labor. Another important reason for the imbalance is U.S. export control on high-tech products. RMB appreciation will neither resolve the trade imbalance between China and the U.S., nor address other domestic issues in the U.S. such as low savings, credit spending and unemployment. We hope the relevant U.S. political figures could think seriously about how to resolve the structural problems in U.S. economy instead of blaming others all along.
The Chinese Government will stay committed to a managed floating exchange rate regime based on market supply and demand and follow the principles of independent decision making, controllability and gradual progress so as to steadily press ahead with the reform of the RMB exchange rate formation mechanism and keep the RMB exchange rate basically stable at an appropriate and equilibrium level. When and how the reform will take place depends on our overall consideration based on the changes in world economic situation and the performance of China's economy. China is resolutely opposed to politicizing the RMB exchange rate issue and citing it as an excuse for protectionist measures against China. These are totally unjustified and will end up hurting both sides.