Revalue Renminbi or Dogs Unleashed, Patterson Says
China has until the end of the month to strengthen its currency before Congressional leaders impose measures to counter what they say is an unfair trade advantage, according to JPMorgan Chase & Co.’s Rebecca Patterson.
Senator Charles Schumer of New York has introduced a bill that would require the Treasury Department to determine if a nation has a currency misaligned with the U.S. dollar. The proposal would let companies seek import duties to compensate for an undervalued currency and impose tariffs. China must begin strengthening the yuan, also known as the renminbi, before the Group of 20 meeting in Toronto on June 25, Patterson said,
“Treasury’s said, ‘We’re going to stay quiet; we’re not going to put any pressure on you,” Patterson, head of foreign exchange at the private banking unit of JPMorgan, said during a Bloomberg Radio interview today on Surveillance with Tom Keene. “‘You have a window to move on the renminbi, strengthen it, and make everything more competitive. If it doesn’t happen by the end of June, we can’t hold the dogs back much longer’ -- no offense to the congressmen.”
Since July 2008, the Chinese currency has been held by officials around 6.83 per dollar, after Premier Wen Jiabao’s government allowed a 21 percent advance in the prior three years. The policy helped exporters weather last year’s contraction in global trade while spurring criticism that China is giving its companies an unfair subsidy.
Treasury Secretary Timothy F. Geithner said before Congress today that China’s exchange-rate policy is an impediment to a more balanced global recovery and allowing the yuan to strengthen would benefit Chinese consumers. The Senate will vote within two weeks on the measure aimed at getting China to raise the value of the yuan, Schumer said yesterday.
Fastest Growing
China’s exports jumped 48.5 percent in May from a year earlier, the biggest gain in more than six years, indicating Europe’s sovereign-debt crisis has yet to pose a restraint on the world’s fastest-growing major economy.
“Chinese officials are smarter than some folks in the market give them credit for,” Patterson said. “Of the policy makers around the world, they’re in a unique situation: China is starting from a position of strength.”
China’s small budget deficit, huge foreign reserves, and huge current account surplus mean that even if global growth slows, it has room to respond, according to Patterson.
“Even if the U.S. and Europe fall off a cliff, China can act,” she said. “It can do something to keep growth up and if growth is getting too tight, boom, they put on administrative measures and they prick the bubbles before they overheat. China is actually able and is trying very hard to engineer its own version of Goldilocks.”
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