CCTV.com - CNTV English - CCTV News


Homepage > News > Biz >

No winner in "currency war"

10-12-2010 08:40 BJT

by Wang Jingqiang, Fu Yunwei

BEIJING, Oct. 11 (Xinhua) -- The international financial market is now undergoing great turbulence and people are afraid that the Pandora's Box of a "currency war" might be opened. Yet no one will become the winner in this war, nor will any country benefit from such disputes.

The so-called "currency war" is referring to actions countries take to drive down the exchange rate of their own currencies, hoping to gain competitive advantage in export and consequently protect or expand the shares of their related industries in the global market.

During the financial crisis, some European countries, together with the United States, adopted expansionary fiscal and monetary policies and infused massive liquidity into the market, which was a key factor of the continuous depreciation of their currencies like the U.S. dollar.

As long as their policies remain unchanged, other related countries will face the pressure of appreciating their own currencies and simply devaluating the currency will not solve the fundamental problem.

These developed economies are still suffering from slow recovery, increasing unemployment rate and public finance imbalance. With the growing need of larger export volume, the international trade is apt to be engulfed in more and more disputes.

A "currency war" at this very moment will do nothing good but harm all stakeholders through the deduction of import quotas and increase of tariffs.

At the 13th China-EU Summit, Chinese Premier Wen Jiabao called for all responsible nations to avoid trade wars and currency wars, which is really worth considering about, as most developed countries and some emerging economies are still faced with crucial adjustment and a sluggish economic recovery.

The result of a "currency war" is to abandon cooperation and coordination between all countries and bring about a currency depreciation competition, in which a country's short-term export competitive advantage gained by a lower exchange rate will be quickly counteracted by similar policies of other nations.

People have suffered enough from currency wars in history. During the 1930s economic crisis, many main economies abandoned the gold standard and devaluated their currencies, which further harmed the international trade. This was also one of the causes that led to the World War II.

After the breakout of the latest financial crisis, the international community conducted historical cooperation through frameworks like G-20 Summit to cushion its impact. Coordination and effectiveness of economic stimulus policies were enhanced and the financial markets were stabilized through financial reforms.

The above examples have clearly showed that protectionism will bring only separation and social turmoil, while unity and cooperation of the international community serve the only way out in a financial crisis.

What is worth noticing is that in some countries, there is a tendency of rising trade protectionism as the crisis is retreating. IMF chief Dominique Strauss-Kahn pointed out that some countries were not as willing to cooperate as before, adding that "everybody realizes that there is no single solution that you can apply in your country without having a plan at the global level."

Editor:Xiong Qu |Source: Xinhua

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program