Washington: Threatening China with trade sanctions is "particularly dangerous" now as the US depends increasingly on its third-largest export market to help recover from the worst recession in seven decades, said Stephen Roach, non-executive chairman of Morgan Stanley Asia.
With US consumers squeezed by unemployment above nine per cent, US President Barack Obama has set a target of doubling US exports within five years to help drive growth. US policy makers should refrain from threatening sanctions and recognise China is unlikely to speed up revaluation of its currency more than the pace since 2005, Roach said.
"They've identified the target of doubling our exports," Roach said in a Bloomberg Television interview on Surveillance Midday with Tom Keene in New York yesterday. "We can't do that without China. As long as China remains on a path for gradual currency appreciation, we'll be fine."
Obama and President Hu Jintao of China, after meeting on Thursday for the eighth time, said the two countries can keep fostering commercial ties while working through differences on currency policy and human rights. That didn't stop Obama from criticising China's policy on the yuan, blamed by his administration and lawmakers for making American exports too expensive.
Roach said China's leadership was seeking to move the country away from its export-led growth model toward relying more on consumer spending, which meant policy makers would have to keep a tighter rein on inflation as households become more assertive.
"China can't afford an inflation problem when it's also changing the growth model," he said. "With a consumption model comes the aspirational values of a consumer society."
China's economic growth accelerated to 9.8 per cent in the fourth quarter as industrial production and retail sales picked up, sending stocks lower from Asia to Europe on concern policy makers will raise interest rates and stem the expansion.
