Beijing has hit out over a mooted US bill targeting the value of its currency. Chinese anger is understandable. But starting a war of words may alienate its remaining supporters, and make the bill more likely to pass.
China’s approach has hardened as its economy has strengthened. The Commerce Ministry said on October 19 that the new bill, which could see the yuan’s value used to justify trade tariffs, violates international rules and merits retaliation.
After the Senate passed it in a first vote last week, three Chinese ministries took the unusual step of issuing strongly worded statements.
The strong reaction is probably unnecessary. House Speaker John Boehner says the bill poses a “very severe risk” of starting a trade war and has threatened to stop a vote taking place.
If he reversed his position, the bill would probably pass: 225 House lawmakers have signed up as co-sponsors.
That would put President Barack Obama, up for re-election next year, on the spot to defy popular opinion and veto it. A too-fierce Chinese stance could force his hand.
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Beijing may feel it has lost vital support. Business groups like the American Chamber of Commerce could once be relied on to argue against trade blocks. Many US firms produce goods in China, and would be hit by import duties.
But with US unemployment near 10 percent, few now dare stick their heads out.
They’re also having a tougher time in China: the country slid four places to 91st in the World Bank’s latest Ease of Doing Business index.
Were the bill to pass, China could be in trouble. World Trade Organisation rules are vague on trade subsidies, and the US has strong influence over the World Trade Organisation. Softer approaches, including flashy advertisements in New York’s Times Square, have so far fallen flat.
The Chinese embassy’s lobbying campaigns aimed at US lawmakers’ aides won’t be as effective as objections from America’s own companies. But provided Beijing doesn’t reach for the big guns, common sense should prevail.