US and China summit: The clash of currencies
China's currency is making inroads in markets dominated by the US dollar --- even as Beijing manipulates the yuan's value. The US can't buy into Beijing's zero-sum view of the currency markets.
Too much of what divides China and the US these days, even during their cozy summit this week, relies on a false assumption: That one country must lose at the expense of the other.
A loss of jobs in the US, for example, is seen as a gain of jobs in China. Or the US Navy’s protecting presence in Asia must give way to a rising Chinese Navy.
Nowhere is that zero-sum way of thinking more prevalent than in China’s attempt to replace the greenback with the redback – or the US dollar with the yuan – in world currency markets.
President Hu Jintao went so far as to tell journalists before his meetings this week with President Obama that the dollar’s dominance in global markets is a “product of the past.”
And Chinese officials, especially after the recent US-led global recession, have touted China’s state-run economy as the new model for other nations.
And yet most international trade is still conducted in dollars. The dollar’s value even rose during the recession despite US troubles; investors (including China) have faith in America as a haven for their money.