At a time when the rest of the world's economies are barely limping along with about 1.5 per cent growth, the Chinese economy continues to go from strength to strength, with industrial output in June rising by 16.9 per cent year-on-year and exports surging 32.5 per cent.
Given these statistics, it is perhaps understandable that other countries are inclined to see China's successes as the cause of their problems. Over the past few months, international pressure - mostly from the US and Japan - has been building for China to revalue its currency. A few weeks ago, 16 congressmen wrote to US President George W. Bush, saying that the Chinese currency was 'unfairly' undervalued by 15 to 40 per cent and was taking jobs away from America. And Japanese Finance Minister Masajuro Shiokawa said recently: 'It doesn't serve Japan's interest to have what we perceive as an artificially high yuan.'
The Chinese have made it clear that because currency stability is very important to them, especially at a time when they are going through sensitive economic and financial reforms, they are not about to revalue the renminbi. Besides, they feel they have been blamed for something for which they are not responsible.
Chinese economists explain that the world is going through economic restructuring and, as a People's Daily article said: 'The world's labour-intensive industries naturally migrate to locations where abundant labour is available, and low wages are a major factor in cutting production costs. If manufacturing jobs don't go to China, it goes without question that they will go to other countries with low productions costs, like India, Vietnam or Malaysia. Certainly, these jobs are not going back to the United States, where the manufacturing industry, with its relatively high costs of production, is not as competitive in the globalised era as it used to be.'
In other words, for American manufacturers to seek to protect jobs by keeping costs in overseas countries high is like King Canute railing against the tide. This is globalisation in action. Manufacturing jobs will migrate to low-cost countries.
China also remembers Japan's painful experience after the revaluation of its currency as a result of American pressure. The value of the yen went from 240 to the US dollar to 120, doubling in two years. The revalued yen saw Japan first go through a bubble economy, the collapse of which led the country into a deep economic recession.
Stephen Roach, Morgan Stanley's chief economist, is a strong supporter of the Chinese position. He believes China is being made a scapegoat. Writing in the South China Morning Post on July 18, he said that 'the world has got the China story dead wrong ... The world has formed the erroneous impression that newly emerging Chinese companies are capturing global market share with reckless abandon ... The real export dynamic in China comes far more from the conscious outsourcing strategies of western multinationals.'