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This article also appeared in the Business Standard.
Back in 1971, the then US Treasury Secretary, John Connolly, told his European counterparts that the dollar was “our currency, but your problem”. Today, it seems that China has returned that favour. Its currency has become a problem for the US. Not just the politics but the intellectual climate has become charged with even Nobel laureate Paul Krugman urging strong trade action against China. Treasury Secretary Tim Geithner has a damned-if-I-do-damned-if-I-don’t choice facing him in mid-April, when he is required by law to pronounce on whether China is a currency manipulator.
My colleage Arvind Subramanian published an intriguing Op-Ed in the Financial Times this week. In “The Weak Renminbi is Not Just America’s Problem” Arvind notes that the undervalued Chinese currency is a global problem that requires a multilateral response. He then argues persuasively that neither the United States nor the IMF can be expected to persuade China to revalue its currency. Instead, he says, such action should come from the WTO.
China recently announced it will reduce the emissions-intensity of its economy (ratio of emissions to GDP) by at least 40-45 percent by 2020. But in Copenhagen it is resisting making that promise an internationally binding commitment. That’s a big problem for the U.S. negotiators, since the Congress is adamant: the U.S. will not commit until and unless the Chinese do too.
Last week, the Aluminum Corp. of China, otherwise known as Chinalco, received regulatory approval to proceed with its investment of $19.5 billion in the Australian-based mining giant Rio Tinto, giving the Chinese access to a large and secure supply of iron ore, copper, aluminium and other resources in Australia and Latin America. Is this a signal that China is losing interest in Africa? Or that African governments are becoming disenchanted with their Chinese partners?
Steven Chu, who faces confirmation hearings in the Senate today, is widely recognized as one of the world’s leading authorities on renewable energy. But less known is the fact that he presents the United States with a unique opportunity to make progress in its ongoing dialogue with China on climate change (see for example this commentary on UPI Asia).
Once again the G8 has come up tragically short on climate change and a host of urgent problems affecting poor people in developing countries. The good news is that they are at least discussing the right topics. The first Hokkaido G8 document, on the World Economy spills lots of ink on relations between rich and developing economies, including for example, reaffirmation of support for the Extractive Industries Transparency Initiative.
Last month, I reported on the first public release of China's Export-Import Bank's environmental policy and suggested that China's overtures of increased transparency might present an opportunity for other donors to engage China in a more cooperative partnership. It seems the International Financial Corp. (IFC), the World Bank branch for private sector lending, is doing just that.