UN think-tank backs Beijing in currency row

A UN think-tank yesterday backed China’s controls on the renminbi despite US and EU pressure, saying that exposing the Chinese currency to the money markets would pose greater global risks.
“Expecting that China will leave its exchange rate to the mercy of totally unreliable markets and risk a Japan-like appreciation shock ignores the importance of its domestic and external stability for the region and for the globe,” said the UN Conference on Trade and Development.
China has been under intense pressure from the United States and the European Union, to allow its currency to appreciate.
Washington and Brussels claim that the Beijing has intentionally kept the currency low to boost its exports, particularly in a bid to exit from the global economic crisis.
UNCTAD noted however, that China has “done more than any other emerging economy to stimulate domestic demand” in order to mitigate the crisis.
As a result, domestic private consumption rose about nine percent in 2009, “backed by salary increases in the two-digit range.”
Labour costs are therefore rising at a faster pace than elsewhere, “resulting in a continuous loss in competitive power even with a fixed exchange rate,” said UNCTAD.
The think-tank also warned that speculation has returned to the markets and that emerging economies could fall victim.
“The global casino, nearly empty a year ago, is crowded again, and many new bets are on the table,” it said.