China Currency Debate: An Inter-Imperialist Fight

After China embarked on a modest plan to re-valuate its currency upward before the June G-20 meeting in Toronto, the Western press continued to attack it for “intentionally” devaluing the renminbi (alternatively known as the “yuan”). The NY Times’ Paul Krugman (6/24) has led the charge, calling the revaluation an act of “bad faith” and “an attempt to exploit U.S. restraint,” even advocating trade sanctions on China.  But further investigation reveals these attacks are based not on fact but on the inter-imperialist rivalry heating up between U.S. and Chinese rulers.

Dating back to 2005, the U.S. has claimed China has unfairly undervalued its currency, giving an advantage to Chinese producers and exacerbating the U.S.-China trade deficit. Many in the media and in Congress have even blamed China’s currency valuation for the current economic crisis in the U.S. that was actually set off by the latter’s own weakness.¹

In reality, currency valuation has became a highly speculative business ever since the dissolution of the 1971 Bretton-Woods Agreement and the dropping of the gold-standard. Analyzing all the various models for valuating currency, in 2007 the International Monetary Fund (IMF) reported that the renminbi could be undervalued by as much as 50% or as little as 0%, depending on which model was used. That same year Morgan Stanley used four separate models to valuate the renminbi and found it was, at most, 1% undervalued.² The IMF continues to assert that the undervaluing of the renminbi is either minor or non-existent.³

So why the continued attacks on China? They represent the increasing  inter-imperialist rivalry between U.S. and Chinese bosses. China has become an increasingly attractive bogeyman for the collapsing U.S. economy (for more on these myths see “China Bashing” in “The Communist,” Summer 2008). Attacks on Chinese “job-stealing” and currency “manipulation” are used as a smokescreen for the internal weaknesses of U.S. capitalism.

Anti-China rhetoric also serves as a basis for increasing U.S. attacks on growing Chinese imperialism. As stated clearly in the 1999 Hart-Rudman Report, U.S. bosses see their future as resting on their ability to contain Chinese economic growth.⁴ Efforts to force China to artificially inflate the value of its currency are aimed at decreasing Chinese exports and making China’s domestic market more amenable to foreign imports.

This revaluation would severely punish China’s workers and stifle China’s economic growth, all while rewarding Western speculators.⁵ Not surprisingly, Chinese capitalists have not been eager to play the U.S. bosses’ game.

 The hollowness of Western attacks on China was revealed last April. On the eve of a Congressional report detailing Chinese economic villainy, the Obama Administration chose instead to back off its anti-China rhetoric after China agreed to relax its laws against foreign capital inflows into the Chinese domestic market.⁶

U.S. capitalists are using these attacks to try to pry their way into growing Chinese markets while simultaneously mentally conditioning U.S. workers for a potential future war with China. China has responded by shifting its export markets from the U.S. to the European Union and Russia.⁷ China has also repeatedly expressed its interest in selling off U.S. treasury bonds.⁸

The current tension between U.S. and Chinese capitalists will not ease until one imperialist is able to fully impose its will over the other. As Lenin noted in “Imperialism, The Highest Stage of Capitalism,” this is the pre-condition for major inter-imperialist war in the modern era. J

Sources:

The Communist, “China Bashing Simply a Smokescreen for U.S. Bosses Weakness,” Summer 2008; Andrew Fischer, UNRISD Paper, “The Perils of Paradigm Maintenance,” 11/26/09, p 7-13.

 The Communist, p 7.

 Andrew Fischer, Monthly Review, “The Great China Currency Debate: For Workers or Speculators?” 6/25/10.

US Commission on National Security/21st Century, “Phase I: Report on the Emerging Global Security Environment for the First Quarter of the 21st Century,” 9/15/1999, p 70, 138.

 Monthly Review.

 Monthly Review.

 The Communist, p 8.

 NYT, “China Losing Taste for Debt From the US,” 1/7/09; NYT, “China Grows More Picky About Debt,” 5/20/09.