WIC Template

1 Talking Point 5 The Week in 60 Seconds 6 Banking & Finance 7 Economy Week in China 8 China Tourist 9 China Consumer 11 Property 13 Environment 14 China and the World 21 October 2011 16 Chinese Character 18 Society & Culture Issue 126 22 And Finally www.weekinchina.com 24 The Back Page Beijing bristles over Romney rant m o c . n i e t s p e a t i n e b . w w w y b g u in New US Senate legislation targets China and could trigger a trade war o k y n o a t B s t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Talking Point 21 October 2011 The Senate’s scapegoat? New US bill could label China a currency manipulator with dire results Facing off: the exchange rate of the Chinese renminbi has become a political hotcake in the US once again “ o disgusting, so dirty and vile legislation aimed at curtailing im- Chuck Schumer. Sthat the reading of one page was ports – the Smoot-Hawley Act of the Most analysts agree that China enough for me… It is most same year – that the senator is now would take any US tariff action im- damnable! It is written by a man best-remembered. And he is now mediately to the World Trade Or- with a diseased mind and a soul so getting mention again, as the US ganisation. But the damage would black that he would obscure even Congress considers a new piece of already have been done, they say. the darkness of hell!” currency legislation that could also Tariffs would have been imposed in It doesn’t sound like DH lead to a major trade confrontation, the period leading up to any WTO Lawrence’s Lady Chatterley’s Lover this time with the Chinese. ruling, and the Chinese can be ex- was ever going to be bedtime read- pected to respond with counter- ing for Reed Smoot, US senator for The story so far… measures. Utah, who led calls in March 1930 The US Senate has voted in support The fear is that global trade will for a ban on the import of obscene of a new bill proposing tariffs on take a damaging hit at a time when literature. countries that purposely under- sentiment is already fragile. The campaign generated plenty value their currency. of media attention (“Smoot Smites China isn’t mentioned by name Is the legislation going to pass? Photo Source: Shutterstock Source: Photo Smut” was one headline), with the but there’s no doubt that it is the Talk of wider trade war between Bei- Kama Sutra, Casanova’s memoirs main target of the Currency Ex- jing and Washington isn’t new, and and even verse from Scottish poet change Rate Oversight Reform Act, has flared up repeatedly during nar- Robbie Burns also on his hit list. which is co-authored by Democrat rower spats in the past. Try WiC31 But it was for a different piece of senator and longtime China critic, (for tyres), WiC44 (for steel pipe) and 1 Week in China Talking Point 21 October 2011 WiC41 (for chicken feet). it would put Obama very much on The legislation – which started Similarly, tensions over the Chi- the spot to veto the proposals. out as a minor bill to appease farm- nese currency have also come in for ers hit by falling commodity prices – regular comment since the first edi- Why the push now? developed into a protectionist free- tion of WiC in February 2009. In part because the bill’s sponsors for-all, as interest groups pressured Back then it was presidential can- want to feed on American frustra- lawmakers into topping-up tariffs didate Obama playing the tough tion at its economic malaise, says on thousands of foreign goods. guy, with a plan to look the Chinese Michael Cohen at Foreign Policy The result was international fury. straight in the eye as he warned magazine. Also, tough times often America’s trading partners (with them to change their ways. “If you end up in the search for a scapegoat, Canada at the forefront) struck back guys keep on manipulating your Cohen says. Here he sees compar- with a series of retaliatory meas- currency, we are going to start shut- isons with the months following the ures. Global trade dropped sharply ting off access to some of our mar- Wall Street Crash of 1929, when Con- and American exports were seri- kets” was the message he said he gress passed the Smoot-Hawley Act ously hit. was going to deliver. (Smoot and Hawley were both Re- Xinhua also did its best to dust off Obama as president hasn’t gone publicans, as it happens). the history books this month and through with the threat. In fact, as Bob Davis at the Wall Street Journal points out, no administration since Clinton’s in 1994 has actually tagged China as a currency manipulator. Last Friday the Treasury De- partment again postponed a decision to label China as such. Nor has the White House ever taken the next step of imposing duties on China because of currency mal- practice. This time is different? House Speaker (and Republican) John Boehner has said that he will seek to block the bill (a “dangerous” proposal) from reaching the House of Representatives. But unusually, he is starting to come under more pressure from his own side to sup- (Foreign Exchange) (Financing) (Trade) port the legislation. Republicans have traditionally rallied in support Renminbi spoken here of freer trade but they now seem We help clients trade RMB globally, find competitive and diversified funding sources and manage currency risk. more divided, and 16 of their party For more information, visit www.hsbcnet.com/rmb backed the Schumer proposals. Nor does Boehner seem to want to go out ahead of the crowd in quashing the bill, instead calling for Obama himself to indicate whether he will veto it. “It’d be nice for the president of the United States to make clear what his position is,” he has told re- Renminbi (RMB) is currently not freely convertible and conversion of RMB through banks in Hong Kong is subject to certain restrictions. Clients should be reminded of conversion risk in RMB products. In addition, there is a liquidity risk associated with RMB products, especially if such investments do not have an active secondary market porters. “It’s time for the president and their prices have large bid/offer spreads. RMB products in Hong Kong are denominated and settled in RMB deliverable in Hong Kong, which represents a market which is different from that of RMB deliverable in Mainland China. For individual clients, conversion of RMB is subject to the daily limit in Hong Kong, the clients may have to allow time for the conversion of RMB from/to another currency of an amount exceeding the daily limit. to lead.” HSBC operates in various jurisdictions through its affiliates, including, but not limited to, HSBC Bank plc, authorised and regulated by the Financial Services Authority, The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (USA) Inc., member of NYSE, FINRA and SIPC, and HSBC Bank USA, NA. 11-087 If the bill did progress this time, 2 Week in China Talking Point 21 October 2011 make the link to Smoot-Hawley days. “Comparing the current political and social situation with that of 80 years ago, we can find stark similar- ities: an economic downturn, a high unemployment rate, marked popu- lar discontent and growing political conflicts, especially when presidential politics is getting hot,” the state news agency warned. Ah yes, the politics… As we also wrote last year (WiC88) the China-as-villain theme tends to Don’t call me soft on China, Mitt: Rick Perry debates with Romney become more prominent during certain phases of the US political cycle. American becomes more of a weak- operations – are also perturbed, and In a single week of campaigning ness. For example, Cheng Li, a warn of major upheaval should the for the US midterms last December, Brookings Institution China scholar, legislation pass. 29 candidates ran advertisements told the Wall Street Journal recently The China Daily reported on a let- suggesting that their opponents that the threats emanating from ter sent in late September to Senate were too sympathetic to China, and Washington have harmed the leaders by 51 business and industry that as a result Americans were suf- prospects of Vice Premier Wang Qis- organisations, warning that “unilat- fering. And this autumn the rheto- han, who pundits reckoned to have eral legislation on this issue would ric is being stepped up once again, an outside shot at getting the num- be counterproductive not only to the although this time it is Republican ber two slot in the government next goals related to China’s exchange presidential front-runner Mitt Rom- year. Wang has been more promi- rate that we all share, but also to our ney making much of the early pace. nent than others in calling for China nation’s broader objectives of ad- “Day one, I will issue an execu- to rely more on domestic consump- dressing the many and growing chal- tive order identifying China as a tion than exports – a position that lenges that we face in China.” currency manipulator,” Romney an- dovetails with Washington’s press- There were similar warnings in nounced in a debate last week. “Peo- ing for a stronger yuan.

Load more