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Chinese economic policy key plank in US political battle

US President George W. Bush gave the Lunar New Year an inauspicious start Wednesday by again chiding the Chinese government over its trade and currency policies.

During a speech in Ohio on domestic policies, Bush reiterated what has become his administration's line: the US wants free trade, but its partners must be committed to fair practices. Bush cited China as an example of a country that engages in unfair trade practices, presumably because the yuan is kept undervalued against the dollar.

"We expect countries like China to understand that trade imbalances means trade is not balanced and fair," Bush. "They have got to deal with their currency."

Nevertheless, the Year of the Monkey, which began yesterday, augurs well for China. Last year, the Year of the Goat, China's economy grew at a rate of 9.1 percent, its best performance since 1996 and more than double the pace of growth the US managed last year.

In fact, China's economic success is helping to keep the currency issue a major bone of contention between the two countries. Rightly or wrongly, a number of influential voices in the US have blamed the loss of millions of jobs on competition from China's expansive manufacturing sector.

US politicians, including Bush, have groused about the yuan's peg to the dollar for some time. As the US presidential race heats up, Bush and his Democratic challengers will concentrate more and more on what look to be the hot issues -- the economy in general and employment in particular.

The loss of manufacturing jobs is a sore point in several states deemed necessary for any victorious presidential candidate to carry.

The Iowa Democratic caucuses gave proof that the economy and jobs are dominant concerns among voters.

The two top finishers, Senator John Kerry of Massachusetts and Senator John Edwards of North Carolina, are both on record calling for an end to "Chinese trade abuses" and "currency manipulation."

According to the official Web site for Senator Kerry's campaign, "China, Japan and other nations have purposely kept their currency undervalued relative to the US dollar to promote exports in the US and undermine US products abroad."

Futhermore, "John Kerry believes we must use the full force of the World Trade Organization to take on countries that are manipulating their currency to undermine US exports," the site states.

A corresponding Web site for Senator Edwards states "China's efforts to keep the yuan undervalued by as much as 40 percent have given their products a substantial price advantage in worldwide markets."

"Edwards has called for formal steps to end Chinese currency manipulation," the Web site said.

While neither Kerry nor Edwards are the worst China bashers among the Democratic challengers, they are using straightforward language, sure to play well with worried factory workers in the American heartland.

In contrast, the Bush administration has been restrained in its criticism of China in recent months, most likely because high-level private talks are more effective than public harangues.

However, it can't leave Democratic candidates to surf the anti-China wave by themselves.

While Wednesday's speech by Bush won't exactly send shivers down the spines of Beijing's leaders, it does serve as a reminder that dissatisfaction with the yuan's regime isn't going to disappear from the US political scene.

While Bush is making a play for domestic votes, he is also signaling to China that US patience with the speed at which China moves to a more flexible currency has its limits.

The Chinese government has always answered that while it will one day give the yuan hard currency status, it needs more time to get its financial system, especially its debt-ridden banks, into shape.
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