China official: dollar printing causing inflation By Elaine Kurtnbach,
AP Business Writer | On Wednesday October 27, 2010, 5:55 am
EDT
China trade minister says excess printing
of US dollars causing inflation shock
SHANGHAI (AP) -- Out-of-control printing
of the U.S. dollar is forcing inflation on China, pushing
up prices for commodities and labor, trade minister Chen
Deming says in an escalation of rhetoric over currency and
other tensions ahead of key international meetings.
Beijing has been chafing at U.S. pressure
over its currency and massive imbalances in trade and investment
that are symptomatic of deeper problems in the world economy
-- Asia and China's addiction to weak currencies to boost
their export-reliant economies and the legacy of debt-fueled
consumption in the U.S.
Fearing a trade war that could send the
world economy into reverse, finance chiefs from the Group
of 20 leading advanced and developed nations last weekend
vowed to avoid weakening their currencies. But they did
not set specific targets for reducing imbalances such as
China's huge trade surplus and the U.S. trade deficit.
"Uncontrolled printing of dollars and
rising international prices for commodities are causing
an imported inflationary 'shock' for China and are a key
factor behind increasing uncertainty," the state-run
newspaper China Business News quoted Chen as saying while
attending the autumn session of the Canton Trade Fair.
Concern over the potential inflationary
impact of stimulus spending, funded by newly printed dollars,
is not limited to China. Printing more money is often associated
with a related rise in prices, as a larger pool of cash
chases a finite number of investing and buying opportunities.
The Federal Reserve is expected to further
loosen monetary policy next week with the announcement of
a Treasury-buying program known as quantative easing that
aims to boost the economy by lowering long-term interest
rates.
The U.S. economy is in such a deep hole
with unemployment running near 10 percent that the move
is unlikely to create an inflation problem for Americans
in the near term. But expectations of more monetary stimulus
have further weakened the dollar, increasing demand for
commodities that are mainly traded in greenbacks, and potentially
creating inflationary problems for other countries.
The influences causing rising international
commodity prices are many, however, and the rising strength
of China's own currency, the yuan, is giving its manufacturers
stronger purchasing power.
"It's more than just printing of dollars
by the Federal Reserve. China is an important source of
demand for commodities," said David Cohen, regional
economist for Action Economics in Singapore.
He characterized the comments as "posturing"
ahead of important upcoming meetings, such as the G20 summit
set for Nov. 11-12 in Seoul, South Korea and a forum starting
Thursday in Hanoi, Vietnam consisting of Asian nations as
well as the U.S., Russia, Australia and New Zealand.
"It's presumably driven by a tactical
response to complaints from the U.S.," he said.
Ahead of key congressional elections next
week, Beijing faces mounting pressure from U.S. lawmakers
to ease controls they say keep the yuan artificially cheap
against the dollar.
Legislation passed Sept. 30 by the U.S.
House of Representatives would allow Washington to sanction
governments that manipulate their currency for trade advantage.
The Senate is due to take up the measure after November
elections.
Chen, the trade minister, said Chinese companies
had adjusted their strategies to take the potential impact
of a stronger yuan into account and keep the country's exports
steady.
"Facing the uncontrolled issuing of
money by the U.S. and the resulting inflationary impact
on global commodity prices is a big problem for Chinese
companies," he was quoted as saying.
Beijing is still trying to restore normal
economic conditions following a huge burst of stimulus spending
that helped China quickly bounce back from the global crisis.
The central bank raised its key interest rate last week
for the first time since 2007 to control inflation and excessive
bank lending.
September's inflation rate rose to 3.6 percent
over a year earlier from August's 3.5 percent -- above the
3 percent official target. But officials mainly blamed surging
food costs due to shortages of vegetables and other items.