No coalition of the willing

The U.S. may find very little international enthusiasm for labeling China a currency market manipulator. If manipulating the currency is supposed to help boost Chinese exports, then lately, it has not worked very well. If doing so is simply an effort to boost exports, then lately it has worked very well. However, such a claim will ring hollow to many as the Chinese yuan has appreciated markedly against most of the world’s currencies since discontinuing its peg to the dollar in July 2005. The South Korean won has declined nearly 37.5 percent against the yuan, the Indonesian rupiah has fallen more than 26 percent, the Indian rupee by 25 percent, the Taiwanese dollar by more than 20 percent, and the Malaysian ringgit by 12 percent.

This trend has not been limited to Asia: The Brazilian real has fallen 13.5 percent against the yuan, the Australian dollar by 27 percent, and the Mexican peso by almost 35 percent. In Europe, the Euro has declined 9 percent against the yuan and the British pound nearly 33 percent.

Moreover, the majority of the yuan’s appreciation vis-àvis these currencies has taken place since the crisis began, arguably, early in the second half of 2007. The yuan has gained about 15.5 percent against the dollar since it broke the peg, and almost 10 percent since July 2007. Citing China as a currency manipulator risks raising international fears of protectionism, but with U.S. unemployment increasing, this possibility is not far from the political surface.

The Japanese yen is the main exception. It has risen about 5 percent against the yuan since July 2005 and a whopping 23 percent since July 2007. Japan may be sympathetic to the U.S. desire for the yuan to appreciate, but the source of the yen’s strength is obviously far beyond Chinese currency manipulation, and is widely recognized to be so.