Premier Wen Jiabao criticized demands for China to appreciate its currency in a news conference at the end of the National People’s Congress on Sunday. Wen said the calls were "unhelpful," and that the renminbi is not undervalued. His comments reiterated the core message of previous statements, although they appeared to be a step back from suggestions that China would consider revaluing its currency if other countries ended their stimulus programs.
The US Treasury Department will shortly issue its semi-annual report on countries that manipulate their currencies. China has not been included in these reports in the past, but that could change as the diplomatic climate in the US becomes more conducive to criticizing Beijing’s currency regime. Wen’s statement that the renminbi is not undervalued will strengthen the hand of US lawmakers who can point to strong evidence that it is.
Maintaining its commitment to keeping the value of the renminbi low will be a boost to China’s exporters: Despite recent impressive growth numbers, exports have not yet recovered to pre-crisis levels. However, the currency issue affects far more than the domestic economy, and patience may be running out overseas. What is good for exporters in the short term could create longer-term problems as other countries react to keep out cheap Chinese exports.