Saturday, December 16, 2006

Here's What Actually Happened in China

I had to go to the French press to get this .

Here are the essential passages of new information not included in American renditions of Paulson and Bernanke's visit to China:

"... Two days of dialogue between the two heavyweights of the global economy did not facilitate a solution to their commercial conflicts."

boxing
[Thanks to adirondackmuseum.net for the photo.]

"The general tone of the inaugural session at the People's Palace was given by the Madam Vice Prime Minister Wu Yi, the government's delegated interlocutor. She promised: 'China will continue to improve its socialist market economy system.' 66 years old, pilar of the CCP and negotiator at China's entry into the WTO in 2001, Wu Yi is often referred to as 'the Iron Lady' by the Chinese media. Opposite the imposing Washington delegation, composed of the Federal Reserve President, Ben Bernanke, and a cortege of secretaries of state, she didn't deviate from her reputation. 'Peking has the sentiment that certain American friends have not only a limited knowledge of Chinese reality, but they hold veritable misconceptions about it,' she explained firmly. 'This lack of understanding' is not 'favorable to a healthy development of bilateral relations.' The speech, accompanied with long explanations of 5,000 years of Chinese history, is almost a rebuke of Washington pressures to accelerate Chinese economic reforms."

According to this article, Paulson has stated that each side will continue to make an effort towards compromise. The US will "encourage national saving" (this statement conflicts with Bernanke's speech [read here]), while China will take measures to "increase both consumption and the flexibility of the foreign exchange rate."

The Iron Lady, on the other hand, stressed the differences between the two nations. She encourages the West to make an effort to understand China, arguing that the Chinese have proven their good will; presumably, it is now up to the West to do as much.

I also learned frorm this site (12/14/06 article entitled "La Chine et Les Etats Unis Entament...") that the US has threatened to "pull the trigger to unleash a complaint at the WTO" saying that if they resort to this, it would be because "we will have the feeling that the dialogue option hasn't worked and doesn't look as though it will work."

In other words, it looks like a floating yuan is not on the immediate horizon, and the conflictual tone may be rising between the US Congress and Chinese banking authorities.

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