Chinese Premier Wen Jiabao described China's exchange rate policy with respect to renminbi in the above terms at the conclusion of the National Peoples Congress. This is not good.
You can tell we have a global governance 'problem' when the Chinese leadership makes statements that can be characterized as ‘prickly defensive.’ And the Premier’s statement was definitely that. In fact he accused China’s competitors of doing exactly what China is doing – holding down the vale of the currency to gain advantage over its trading partners.
Though his pointed attack on the US may not be totally wrong – failing to rebuild its own economy and allowing the value of the dollar to decline – the US policy approach is not unreasonable for dealing with global imbalances subject to a wider collaboration and coordinate approach to these imbalances.
How do we know the Premier’s statement can be characterized as ‘prickly defensiveness.’? Well for a start, the Premier defended China’s position by calling on that ‘old saw’ that China was an underdeveloped nation in this case would, according to the Premier need a century or more to reach an advanced status.
Besides this speech tightening the gyre of trade and investment policy competition, the statement raises doubt over Chinese global governance leadership. At the Pittsburgh Summit the G20 leaders agreed that they would collaborate over designing the appropriate exit strategies. As the Leaders statement identified:
We also need to develop a transparent and credible process for withdrawing our extraordinary fiscal, monetary and financial sector support, to be implemented when recovery becomes fully secured. We task our Finance Ministers, working with input from the IMF and the FSB, at their November meeting to continue developing cooperative and coordinated exit strategies recognizing that the scale, timing, and sequencing of this process will vary across countries or regions and across the type of policy measures. Credible exit strategies should be designed and communicated clearly to anchor expectations and reinforce confidence.
Unfortunately from what we read, China failed to provide information to meet the November deadline and the report China ultimately submitted was not a particularly helpful document (See, Keith Bradsher, “China Uses Rules on Global Trade to its Advantage,” NYT, (March 14, 2010)).
The lack of transparency and the prickly defensiveness are signs of growing difficulty in global governance collaboration at the G20. These are not good signs for the upcoming summits in Canada in June and the earlier Finance Ministers meeting.