In an editorial entitled
"How to deal with the US$ as a 'spoiled child'?", the People's Daily, the Chinese Communist Party's (CCP) official newspaper has harshly condemned the US Dollar today. Certainly the piece, which is written in typically obscure CCP language translated into English, is a defense of the valuation of the Yuan. The dollar's decline, which continues
despite US pressure to revalue the Yuan, has China calling out the dollar:
From the view of global pattern with the massive issuance of US dollars, some Asian countries, taking China as a typical head, accumulate this kind of "junk currency" (whose purchasing power is continuously declining) through large scale of export. This is a very unfair pattern for these Asian countries.
So not only does China think that the US currency is junk, it's not happy about its continued purchases of the dollar.
I'll leave the intricacies to folks more schooled in economics than I, but it seems there are two messages here, as there usually are with the People's Daily. The first, obvious message is what I just wrote, that China isn't happy about accumulating what it views as a currency that has an iffy future, at best.
This is obviously a threat that China might stop buying up dollars and financing US debt. There's been plenty written about dollar dumps, so I won't go into that.
The second message in the article is for the US to stop pressuring China to revalue its Yuan:
the US dollar simply continues acting like a "spoiled child" within the international financial system, selfish and self-indulgent, not willing to be responsible for its dominant reserve status in the international financial system, for the excessive issuance of the currency, and for its low saving rates. All it expects is to let developing countries like China assume the consequences of the economic imbalances, just like what it did in dealing with the currency relations with the Japanese Yen in the last century.
In other words, with the US executing a terrible economic policy, there's no reason why China or any other country should be beholden to the demands of Washington.
And then there's the "Spoiled Child" thing. Kind of a not-so-subtle poke at the man sitting in the White House. And trust me, that was intentional. The CCP doesn't make mistakes with words.
Once again, the importance of actually having good policies to back up your threats undermines the Bush Administration in the foreign policy field.
update Treasury Secretary Snow just responded (hat tip cre8fire) today with this bizarre sentiment:
Snow said the United States was disappointed that China was not letting market forces play a larger role in setting the value of its currency, the yuan, but said threats wouldn't help persuade it to move more quickly."We've got to hold their feet to the fire," he said, to make sure that China follows through on pledges to introduce increased currency flexibility.
And no, I didn't miss any text in the middle. "Threats won't help, so we're going to hold their feet to the fire". Pity poor Snow, he's been working for Bush so long he forgets the definition of threat.