China made its debut last night in the club of the world's leading economic powers, as international pressure mounts to change a decade-old currency peg that critics accuse of giving Chinese products an unfair competitive edge.
Yesterday's dinner meeting was the first at which top Chinese economic officials participated in a gathering of the Group of Seven major industrial nations. The heightened level of engagement with Beijing is aimed at easing tensions concerning the Asian giant's integration into the global economy.
Federal Reserve Chairman Alan Greenspan, from left, and U.S. Treasury Secretary John W. Snow greet Chinese Finance Minister Jin Renqing, and Zhou Xiaochuan, governor of the People's Bank of China, on Thursday.
(Dennis Cook -- AP)
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Hours before China's top economic policymakers sat down with their G-7 counterparts, they addressed the currency issue by pledging to "push ahead firmly and steadily" toward a flexible exchange rate for the yuan, which has been fixed at about 8.3 per dollar since 1995.
But the statement, issued after a meeting with U.S. officials, contained no timetable for allowing the yuan to float. Chinese officials have issued similar declarations in the past, but they have held the yuan's exchange rate constant, triggering increasing complaints from economists, business groups, labor unions and politicians that the yuan is too cheap and thus poses a serious problem for companies facing Chinese competition.
"What they don't want to talk about is the 'W' word -- when?" said Morris Goldstein, of the Institute for International Economics. "Here we have one of the world's most important currencies, significantly undervalued, and it makes a difference whether they're going to move the rate next week, next year, five years, 10 years. On that, we haven't gotten anywhere, so in that sense, it's business as usual."
After the G-7 meeting, Treasury Secretary John W. Snow defended the Bush administration's approach to the issue, which involves coaxing the Chinese to change their currency policy rather than bullying them. He cited steps China has taken toward creating the conditions for a flexible yuan, such as loosening restrictions on money flowing in and out of the country. But he conceded that he could not offer a timetable.
"I'm not going to put a clock on it, but 'as soon as possible' is what we're looking for," Snow said at a news conference. "We're not satisfied, but I do think we have to note that some real progress is being made." He expressed satisfaction with the discussions, praising the "richness of the dialogue" and "the detailed rendering" by the Chinese "of the actions they're taking to prepare the way for flexibility."
The lack of action drew a fresh denunciation from Democrats who said it shows a disregard for U.S. workers.
"Today, the administration and China have once again failed to address in a meaningful way this issue that is so vital to American businesses, workers and farmers," said a letter by Sen. Charles E. Schumer (D-N.Y.) and Rep. Sander M. Levin (D-Mich.) to Snow and U.S. Trade Representative Robert B. Zoellick.
Schumer, Levin and several other lawmakers filed a petition this week exhorting the administration to bring a complaint against China's currency policy at the World Trade Organization -- a case administration officials have said Washington would probably lose.
