Wu to Paulson: Stuff It!

Bloomberg:

“China will continue to reform its exchange rate on its own initiative, gradually,” Wu said at a dinner in Washington after two days of talks with U.S. Treasury Secretary Henry Paulson that yielded only minor agreements and failed to quell calls in Congress for sanctions against China.

Over the past six years, we have often written that China will hold fast on her rate of exchange with the U.S. dollar. No benefit accrues to China were she to do otherwise. And here Ms. Wu has told Mr. Paulson so to his face in public on American soil. [American pols must be jumping up and down in choler extremis.] You can’t go much higher than Wu Yi. Is another indication necessary?
And yet the exchange rate is neither the problem, nor the solution. The effect of a revaluation? Alan Greenspan testified the following to Congress on June 23, 2005:

Some observers mistakenly believe that a marked increase in the exchange value of the Chinese renminbi (RMB) relative to the U.S. dollar would significantly increase manufacturing activity and jobs in the United States. I am aware of no credible evidence that supports such a conclusion.

Americans must recognize that making money in China is a rough business — historically so and we must not expect change. It proceeds according to invisible rules. There are no maps and many dead-ends. The weather changes constantly and without notice.
Americans who wish to export more must adapt to the Chinese business environment with the same alacrity, resourcefulness and self-reliance with which their Chinese counterparts often astonish them. They will have to work a lot harder and take less of a profit doing so. Some have been able to do this. Few do it well. Most spend more time complaining. But we see the value of complaint — a terrific banquet, followed by the exclamation, “Stuff it!”

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