Concern grows over currency problem
Chinese Premier Wen Jiabao gives a statement during the opening ceremony of the first EU-China High-Level Cultural Forum at the EU headquarters in Brussels.
TEXT OF STORY
STEVE CHIOTAKIS: Today, the head of the International Monetary Fund voiced concern about how governments are tinkering with exchange rates as a way to tackle their weak domestic economies. At the same time, in Europe this morning, the EU-China summit is focused on the currency issue. Marketplace's Stephen Beard is with us live from London with that. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: All right, so we've seen in this country there's been this cry over the weakness over China's currency, the yuan. Does Europe share that concern?
BEARD: Yes, I would say. Probably just as much as the U.S. Europe is China's biggest export market and there is a widespread feeling here that the Chinese are flooding this market with goods that are partly cheap because the Chinese are holding down the value of their currency. This, of course, makes it correspondingly difficult for European exporters to sell into China. And this is pretty clearly reflected in the figures. In the first half of this year, the EU sold about $100 billion worth of goods to the Chinese, much less than half what the Chinese sold to Europe.
CHIOTAKIS: And Europe and China aside for just a moment, Stephen, it seems the IMF -- the International Monetary Fund -- is fearful about a worldwide currency problem. Is that right?
BEARD: Yes. He says the effect of central banks around the world cutting interest rates and printing more money -- which of course the U.S. among others have done -- the effect of this is to drive down the value of individual currencies. The IMF chief says this is dangerous if everyone does it. Everyone will then rush to protect their own industries from a flood of cheap imports and international trade will suffer. The IMF chief says this could easily derail the global recovery.
CHIOTAKIS: Marketplace's Stephen Beard, thanks.
BEARD: OK Steve.