Great New York Times article on recent RMB appreciation and why the U.S. government is trying to keep it quiet. If you’re into politics, this is fun.
Keep in mind that although significant appreciation has occurred (“up 12 percent since June 2010 on an inflation-adjusted basis and 40 percent since 2005”), a lot of experts still say it has a way to go. (Not all of them, though. Some have even questioned whether a floating RMB would move upward at all.)
So why isn’t the U.S. government acknowledging that progress has been made?
1. Congressional action — admitting that progress has been made might decrease the sense of urgency that has buoyed up support for stupid punitive tariff bills in Congress (i.e. a reality-based, thoughtful decision making process is to be avoided)
2. International support — some nations would rather play nice with China and are looking for a reason to stop the tough talk on currency
3. Pressure on China — perpetual, continuous complaining is seen as a good tactic to maintaining pressure on Beijing
4. Domestic China bashing — admitting that China is not 100% evil might hurt the chances of bashers like Mitt Romney (for Republicans, this is a familiar strategy; they never admit it when Obama does something good either)
Nick Lardy thinks this head-in-the-sand attitude will hurt the U.S.:
“People on the Hill are talking the same way they were a few years ago,” said Nicholas R. Lardy, a China expert at the Peterson Institute for International Economics in Washington. “We should be acknowledging that they’ve made very substantial progress. I think that would give us more credibility.”
Yeah, what he said. Why should China play ball with the U.S. on this issue if the latter never acknowledges the effort?