China media liken U.S. yuan bill to Great Depression act
Tue Oct 11, 2011 5:38am EDT
(Reuters) – China’s state-run news agency scorned on Tuesday U.S. legislation aiming to press it to raise the value of its yuan currency as dangerous pandering to protectionism, likening it to the Smoot-Hawley Act blamed for fanning the Great Depression.
The latest volley from Beijing came ahead of a final Senate vote on the bill, set for late on Tuesday in Washington, which authorizes tariffs on goods from nations that deliberately undervalue their currencies.
Many U.S. lawmakers, trade unions and manufacturing lobbies say China keeps down the value of its yuan currency to give its exports an unfair edge in global markets.
But Chinese officials have said the legislation could trigger a trade war between the world’s two biggest economies if it passes into law, which is far from certain. The Xinhua commentary stepped up the rhetoric by invoking the Great Depression of the 1930s.
“There were similar circumstances in the 1930s,” said a Chinese-language commentary from Xinhua, which described the passage of the Smoot-Hawlet Tariff Act of 1930, which it said exacerbated a drastic economic downturn by triggering a global trade war of protectionist tit-for-tat measures.
“The United States’ economy and the world economy are different from those of the 1930s, but looking back on history would help the U.S. Senate see the problems, contradictions and dangers of the currency bill,” it said.
“China has an old saying that one should use history as a mirror to understand the rise and fall of states.”
“We hope that those American politicians clamoring to force the renminbi to appreciate will absorb the lessons of history and head the voices of reason, and not commit a foolhardy act that will harm their own people and others.”
The “renminbi,” or “people’s money,” is another name for China’s currency.
China controls the pace of yuan exchange rate movements by setting a daily mid-point from which the currency can rise or fall 0.5 percent versus the dollar each day, and also by intervening in trading on the domestic market.
On Tuesday, the People’s Bank of China fixed the yuan daily mid-point at an all-time peak ahead of the vote by the U.S. Senate.
U.S. supporters of the bill say the Senate is almost certain to approve it. But the bill faces stiffer resistance in the House of Representatives where it may never even face a vote. The White House has also suggested the legislation could violate international trade rules.
Even so, Beijing appears worried that it could become embroiled in an unsettling economic feud with Washington in 2012, when President Barack Obama faces a fight for re-election and China’s Communist Party navigates a leadership handover.
High U.S. unemployment, fractious politics and public ire “make it easy for people to make associations with the U.S. economic and social circumstances of the thirties,” said the Xinhua commentary.