RMB revaluation unhelpful to US unemployment: Greenspan

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Last updated at: (Beijing Time) Thursday, February 26, 2004

RMB revaluation unhelpful to US unemployment: Greenspan

Revaluation of the Renminbi (RMB) will be of no help to America's unemployment problem, "economy steersman" Alan Greenspan said twice in a short period of two months.

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Revaluation of the Renminbi (RMB) will be of no help to America's unemployment problem, "economy steersman" Alan Greenspan said twice in a short period of two months.

Federal Reserve Chairman Alan Greenspan testified to the US Congress on February 11 that attempts to restrict Chinese commodities would offer no help to solving America's unemployment problem. This is his second remark on a China issue in two months, which served as a best dose of sobriety to those clamoring for RMB appreciation.

In the past two years America has been tormented by high unemployment rates, and job prospect remains gloomy despite the fact that many economic indexes have reached or surpassed anticipation. Employees in some sectors are under increasing pressure, and it's only natural that they bear a drudge against Chinese commodities flooding the American market and the move-out of American enterprises to China, thinking it's the Chinese who have taken away their "rice bowls" (jobs). Some experts and politicians also made a big fuss about the matter to serve their own needs, as if the problem of unemployment would be resolved as long as the RMB was revalued and China's exports were restrained. In response to these remarks, Greenspan pointed out clearly that this was not a question of China, but a basic issue of international competition. Greenspan's viewpoint is clear-cut-it is not China that caused the reduction of job opportunities, but the invisible hand of global competition.

According to the "standard calculations" of American economic research institutions, an end should have been put to this round of economic depression by November 2001. Since then the country's economy has begun to take an upturn from the slump. By the end of 2003, two years after the recovery, employment opportunities dropped by about 700,000. America witnessed a new economic phenomenon of an "unemployment-typed recovery", because many enterprises raised profits through digesting technology accumulation and the outward shift of production two years ago. The result was the slash of staff, especially staff in the manufacturing sector.

In fact, in the competition of economic globalization, the rise in productivity has become an important factor deciding whether an economy can achieve sustainable development. It was against such a background that the American economy began to recover. Statistics are the best indicators--from 1995 to 2001, America's average annual growth of productivity was 2 percent, while that of the EU was only 1.3 percent. Along with the recovery, the country's productivity improved considerably to reach 4.8 percent in 2002.

For many years, the advantages of American enterprises lie in the fact that they have begun adjustment ahead of others, while one of the adjustment goals is to do more work with fewer hands. For some manufacturing enterprises this implies that they either move their plants to countries with lower labor cost, or to shift their work outward to cheaper laborers. China has become one of the destinations of the outward shift of the American manufacturing sector mainly because of its relatively low labor cost and fairly good investment environment. That's why Greenspan stressed that although RMB revaluation may cause a reduction in the export of Chinese textiles and other commodities, it would not boost America's textile production, because there is greater possibility for America to import textiles from other low-wage Asian countries to replace Chinese textiles.

Economic globalization actually is a process involving both gains and losses. Even the United States, the most powerful country in the world, has to pay a certain price, without which it is impossible for it to gain. From a historical prospective, containing others' development in order to retain one's own domain is both shortsighted and unattainable. As for the United States, it is said that half of the work names in today's America cannot be found in dictionaries published in the 1960s. As regards how to solve the unemployment problem, Greenspan once made the remark that elevating trade barriers would be of no help at all to solving this problem. Preventing foreign products from entering into America will only lower the utilization ratio of US capital and labor resources and cause an overall reduction in domestic living standards. To solve the unemployment problem arising from global competition, it is necessary to provide re-employment training for the jobless instead of setting up barriers.

The challenges America faces today are by no means unprecedented, said American economist Roach. Restructuring-related challenges were once posed to American farmers in the late 19th century, to "plants of sweat and blood" in the early 20th century, as well as to manufactures in the early 1980s. America now is faced with two options, one is to look back and yearn for everything which people once thought to be their own possessions; the other is to stick to the road of prosperity featuring innovations and openness. If those hoping to rely on RMB revaluation to solve unemployment could approach the question from such a height, then they would probably not "moan over things already lost", as Roach put it.

By People's Daily Online

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