The Group of 20

The G-20 participants may have more than doubled from the G-8 but it is still China who is the most important member.

Western governments have been complaining for years that the yuan is undervalued and that this gives Chinese exports an unfair advantage in the global marketplace.  Western trade unionists and politicians have spent decades decrying the loss of jobs and wages to China’s manufacturing industries.  Yet Beijing’s policies continue unabated.  China’s most important consideration in international policy and trade remains the needs of her domestic economy.  

In the run up to the G-20 meeting in Toronto this weekend there was considerable anticipation (as there is before every one of these international governmental confabs) that the yuan would be a major topic. Finally China would be persuaded or forced to bend its yuan policy to the desires of the West, to disadvantage her own export sector for the benefit of her trading partners.  

The G-20 is an ideal publicity event.  It is covered in all countries and in all media; it is one of the premier events on the Davos-UN international association circuit.  The Chinese leaders did not want to be criticized in such a public forum; they know they have much greater economic policy freedom when they are viewed as responsible cooperative members of the world economy.

So they did as they would have been advised to do by any competent public relations professional, ‘Get ahead of the story’.  A week prior to the Toronto circus they announced increased ‘flexibility’ in yuan trading.  What exactly did that mean? A wider trading band? No. A progressive appreciation goal? No.  The Beijing government did not help clarity when they noted that flexibility means that the yuan could devalue as well as appreciate.  But Beijing’s goal was not to promulgate a change in policy but to remove the yuan from the G-20 agenda.  In that they were completely successful.

President Obama observed that the United States expects to yuan to gain in value over the coming months.  As a different professional might advise, ‘Don’t bet your house on it’.