China’s right to undervalue its exchange rate – Arthur Kroeber

China is manipulating its currency to boost its export, US criticasters say. China sees an undervalued exchange rate as the right of a developing country, just like other did in the past, argues economic analyst Arthur Kroeber in the Voice of America.

The Voice of America:

Arthur Kroeber is managing director of GK Dragonomics. He argues that China sees its undervalued currency and trade surplus as a right – and a key part of its national economic development.

“There is no other demonstrated way to become a rich and powerful country other than, at your early stage, to promote exports. One of the tools to promote exports is to run an undervalued exchange rate,” said Kroeber. “The Chinese take the view that, ‘Everyone else who has gotten rich has used the same technique… we want to get rich; we have the same rights as everyone else.’”…

But keeping the yuan under tight government control also carries costs. It means China’s currency is not internationally traded, so many global businesses continue to price goods and contracts in dollars.

Analyst Kroeber said Chinese concerns about the stability of the dollar are becoming a catalyst for Beijing to try to internationalize the use of the yuan.

He said that the goal of the Chinese leadership, 10 or 20 years from now, is to create an internationally accessible bond market large enough to make the Chinese yuan a reserve currency like the dollar.

“What they’ve been trying to do is increase the use of renminbi for settling and invoicing trade. If you have concerns about the currency in which your trade is denominated, traditionally U.S. dollars, using your own currency is a good solution to that,” said Kroeber.

More in the VOA

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.