Mixed messages

The sparks in China’s relationship with the US took on a greener hue in October. Washington launched a probe into claims by the United Steelworkers Union (USW) that Beijing subsidizes domestic producers of clean technology products, including wind, solar energy equipment, batteries and energy-efficient vehicles. The subsidies would be in contravention of WTO rules.
 
US Trade Representative Ron Kirk said Washington is taking the USW’s claims seriously.
 
"For those allegations that are supported by sufficient evidence and that can effectively be addressed through WTO dispute settlement, we will vigorously pursue the enforcement of our rights through WTO litigation," Kirk said.
 
This latest feud is consistent with previous complaints from the USW over what it sees as unfair Chinese trade practices, but is a far cry from the soothing words of Gary Locke, US Commerce Secretary, who earlier in the month described Sino-US partnership in the green-energy field as a "win-win" situation. It was not the only seemingly contradictory message emanating from the various branches of the US government.
 
The US Treasury Department put off its twice-yearly report on the currency practices of its major trading partners until after November’s G20 summit in Seoul, despite Treasury Secretary Timothy Geithner’s earlier utterances that Beijing had made "very, very little progress" on allowing its currency to rise against the dollar.    
 
The delay of the Treasury report no doubt provided both the US and China with political breathing room around the currency issue, but it is not going away.
 
Pressure on China to accelerate appreciation has come not just from the US.
 
The World Bank’s Beijing-based China economist, Ardo Hansson, said renminbi appreciation "is something that is probably in China’s interests for many reasons." His comments followed harsher words from the IMF’s Dominique Strauss-Kahn, who said the renminbi is "substantially undervalued" and that some of China’s trading partners may view exchange rate policy as "a weapon."
 
Yi Gang, deputy governor of the People’s Bank of China, said Beijing would continue along the path of greater flexibility in the renminbi’s exchange rate, but that it would be on an incremental level.
 
However, relatively solid export growth contributed to China recording a trade surplus of US$16.9 billion in September, marking a quarterly surplus of US$65.5 billion – the highest since the US$114 billion recorded in the fourth quarter of 2008. While an undervalued currency isn’t the sole reason for China’s surpluses, "gradual" appreciation may nonetheless be too slow for many.