Sword of Damocles Hangs over Sino-U.S. Economic and Trade Relations

The U.S. Treasury Department announced on Oct. 15 its decision to delay the publication of its semiannual international economic and exchange rate policies report to the Congress. Although America hasn’t falsely listed China as a “currency manipulator” yet, such an issue hangs over the Sino-U.S. economic and trade relations like the sword of Damocles, and will impede any further development unless it is cleared up.

America has been arguing for years that China underestimated its own currency in order to take devious advantages in export, which consequently spurred various American domestic problems such as the trade deficit and rising unemployment rate. The facts, however, prove that such claims are false. America’s economic difficulties remain the same — with some domestic issues even worsening — when RMB has already appreciated by more than 20 percent to USD in the five years since the RMN reform. This shows that America’s blaming RMB exchange rate for its own domestic failure doesn’t hold water. Some analysts pointed out that America should admit its wrong stand on the RMB exchange rate dispute, or else the normal economic and trade relations between the two countries will be affected.

In essence, irrelevant to the exchange rate, the unbalanced financial and monetary policy of the U.S. government itself is the cause of the so-called Sino-U.S. trade imbalance. The IMF, World Bank and other international financial institutions generally agree that adjusting the RMB exchange rate will not save America from its huge trade deficit, and the trade problems between China and America can only be gradually solved through structural adjustment.

Now, with the approaching of the midterm election, publicizing the RMB exchange rate dispute seems to have become a gimmick to win votes. So the shouting to exert pressure on China rose one after another across America’s political arena, making the whole economic issue politicized when it could have been solved through rational talk. Compared with China’s open and cooperative attitude towards the RMB exchange rate, America is pushing the issue into a stiff, tough and ever-upgrading dispute.

Threatening and sanctioning is not the most effective way to deal with international relations, let alone the relations between major powers. China and America, as two big countries with a wide range of common interests who each cannot hurt the other without hurting itself, will prosper only through cooperation. This is why the U.S. government dare not tag China too hastily with the label “currency manipulator.” Yet this is far from satisfying for solving the problem. Apart from the faulty accusation on the RMB mentioned earlier, keeping the exchange rate issue from being politicized is the right track for promoting economic and trade relations between the two nations.

During the Great Depression of the 1930s, Franklin Roosevelt said, “The only thing we have to fear is fear itself.” Today, when pondering this famous line over again, we have to admit that under the circumstance that the world economy is still recovering on a weak foundation, the most fearful thing is doubtless the words and actions that create tumult and panic among people.

America, as one of the most powerful economic entities in the world, plays a significant role in stabilizing the financial market and reducing the impact of the crisis.

After the outbreak of the financial crisis, governments and officials from many countries have reached a consensus that the only way to tackle the crisis is to unite as one and work with joined hands. Therefore, the most urgent task facing the international community is to make policies in different countries more coordinated, stabilize the financial system, curb protectionism and shore up the hard-earned foundation of the economic recovery. America should live up to its responsibility and join hands with other nations to make constructive efforts on the long-term development of the world economy.