In the wake of a trade bill passed by the House on Wednesday aimed primarily at China, that nation on Saturday announced that it would buy more Greek debt and on Sunday spoke out in favor of a stable euro.
The trade bill, passed by a wide margin, would impose sanctions for nations that manipulated their currency to gain advantages in trade; the Senate hoped to vote on similar legislation when Congress returned from its recess, according to The Associated Press. But it was brushed off by commerce ministry spokesman Yao Jian, who said that the measure did not "fit World Trade Organization rules."
The measure came in response to lackluster action by China, who in June under pressure from Washington said it would acquiesce to a more flexible exchange rate. Since then, the yuan has only gained about 2% on the U.S. dollar. Passage of the bill was followed by a further drop in the value of Chinese currency, causing some to fear that the U.S. and China might be on the verge of a trade war.
Saturday’s announcement by Chinese premier Wen Jiabao, reported by Reuters, came at the beginning of a two-day trip to Greece, the first stop on a European tour. Wen, who met with Greek premier George Papandreou, said, "With its foreign exchange reserve, China has already bought and is holding Greek bonds and will keep a positive stance in participating and buying bonds that Greece will issue. China will undertake a great effort to support euro zone countries and Greece to overcome the crisis."
Wen’s support for the euro is apparently meant to help forestall complaints from the EU similar to those of the U.S., that China’s currency is causing problems in Europe as well. Although China has urged action by the EU to address its debt and make the euro more stable, it has so far resisted calls by other nations to take any significant action on the yuan, and Reuters reported, “It even blocked an attempt by G20 leaders in June to praise its decision to allow greater flexibility in the yuan's exchange rate.”
Also on Sunday, Wen appeared in an interview with Fareed Zakaria. In the previously recorded interview, Zakaria asked the Chinese premier about the currency issue, and whether China and the U.S. were on the verge of a trade war. Wen responded that “some people in the United States, in particular some in the U.S. Congress, . . . are politicizing the problems in U.S.-China relations in particular the trade imbalance between our two countries. I don't think this is the right thing to do.”
Wen went on to make three points. The first was that China was not pursuing a trade surplus; the second, that “the increase of trade surplus of a country is not necessarily linked with the exchange policy of that country;” and the third, “the trade imbalance between our two countries is mainly structural in nature. China runs a trade surplus in processing trade, but a deficit in general trade. China has a trade surplus in trade in goods, but a deficit in trade in services.”
He added that since so much manufacturing had moved out of the U.S., Americans had to buy those items elsewhere; if they did not buy them from China they would have to buy them from some other country, thus not helping to resolve the trade imbalance.
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