It has been all sweetness and light from China’s Commerce Ministry since the central bank announced at the weekend that it was abandoning its peg with the US dollar.
The Commerce Ministry, which has close connections with the country’s exporters, has been leading the campaign to stop the renminbi from rising, sometimes in an unusually public and blunt manner by the standards of the Chinese system.
In the past, it has regularly warned about the damaging effects of letting the currency rise against the dollar – most memorably when vice minister Zhong Shan said before a visit to the US: “Water doesn’t boil if it is heated to 99 degree Celsius. But it will boil if it is heated by one more degree.” He added: “A further rise in the renminbi by a very small magnitude might cause fundamental changes” to exporters.
Yet the few public statements from the ministry so far this week have been nothing but polite. Yao Jian, a spokesman for the department, told Xinhua that the stronger currency would initially put some exporters under pressure. But he added: “In the long run, however, exporters will improve business management and expand the industrial chain to make themselves more competitive internationally.”
What to make of the low-key response? It would be bad form to openly criticize a new policy announcement like this, although the cynic might say the Commerce Ministry is quite comfortable with the very modest level of appreciation so far. But looking forward, the public statements of the ministry could contain important clues. If officials start complaining openly about the impact of a rising currency, it could mean that pressure is building within the system for more decisive renminbi appreciation.
Related reading:
Renminbi revaluation, FT Lex
Yuan euphoria fades away fast, FT beyondbrics
Through the looking glass: China’s renminbi, FT beyondbrics
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