China blames excess dollar printing for inflation pain

BEIJING: Rampant issuance of dollars by the United States is saddling China with “imported inflation”, Chinese commerce minister Chen Deming was quoted as saying by state media on Wednesday.

“Given the current situation, companies have thought ahead and prepared for exchange rate fluctuations as well as an increase in labour costs,” Chen said, according to the state-run China Business News. “But because the issuance of dollars is out of control, and international commodities prices are continuing to rise, China is confronted with imported inflation, which has created major uncertainties for businesses,” he said.

The comments came ahead of a meeting of the US Federal Reserve next week at which the central bank is expected to announce additional stimulus measures. While critics in the United States accuse China of artificially undervaluing its currency to give exporters an unfair advantage, Beijing says Washington is foisting its economic woes on the rest of the world by printing more money.

Beijing pledged in June to let the yuan trade more freely and the currency has since strengthened slightly, but US and European policymakers say it could be undervalued by as much as 40 percent. At the weekend, Group of 20 finance ministers meeting in South Korea pledged to “refrain from competitive devaluation of currencies”.

Jittery financial markets were looking for a strong stand from G20 members against beggar-thy-neighbour currency policies, in the leadup to a November 11-12 summit in Seoul.

Chinese Finance Minister Xie Xuren urged “major reserve currency countries to take responsible economic policies”, with the dollar sliding on expectations that the Federal Reserve would launch even bolder monetary easing.

China’s central bank on Wednesday set the central parity rate at 6.6912, weaker than the 6.6762 on Tuesday. The yuan can trade up or down 0.5 percent from that mark.