Greenspan Casts Doubt on Impact Of China Actions
Federal Reserve Chairman Alan Greenspan yesterday questioned whether the rapid increase in imports from China and the fact that the Chinese government has pegged the value of its currency at a low level compared with the dollar are significant factors in the weak U.S. labor market.</br></br>Challenging what he labeled "a strain of so-called conventional wisdom," Greenspan said in a speech in Dallas: "The story on trade and jobs, in my judgment, is a bit more complex, especially with respect to China. . . . If the renminbi were to rise, presumably U.S. imports from China would fall as China loses competitive position to other low-wage economies.</br></br>"But would, for example, reduced imports of textiles from China induce increased output in American factories?" the Fed chairman asked. "Far more likely is that our imports from other low-wage countries would replace Chinese textiles."</br></br>The Bush administration has been pressing China, whose exports to the United States have increased 20 to 25 percent both last year and this year, to move to a flexible exchange rate regime rather than keep its yuan, also called the renminbi, pegged at about 8.28 to the dollar, as it has been for nearly a decade. Under a flexible regime, the yuan's value would be determined primarily by financial markets.</br></br>"With it rapid growth and substantial foreign exchange reserves, China is now in a position to show leadership on the important global issue of exchange rate flexibility," John B. Taylor, the Treasury undersecretary for international affairs, told a congressional hearing a few weeks ago.