Chinese Communist newspaper says US dollar not yuan undermines world economy

 On Friday an official Chinese newspaper made a comment on the weakness of the US dollar saying it is "holding back" other countries' economic recovery, forcing them to choose between squeezed exports and inflation risks. The Chinese-language People's Daily said that the dollar creates problems for many nations across the globe.

"The sustained weakness of the dollar is to a considerable extent holding back the economic recovery and policy adjustments of other countries," said the commentary, adding that the weak dollar was a "heavy blow" to their exports.

If other countries "allow their currencies to freely appreciate, then their already severely diminished exports will deteriorate," it said.

"If they maintain exchange rate stability (against the dollar), their central banks will have to buy more dollars on the foreign exchange market, and this will increase liquidity in their own currencies, further inflating asset prices", it said.

While the comment does not necessarily reflect the statement of the Chinese officials as there were no quotations cited in the article still it replicates the position of China’s leaders who think that it is Washington, not Beijing, to blame for global imbalances that have brought calls for China to let the yuan appreciate in value.

"To minimise the latent risks from arbitrage of the dollar, all countries must respond with swift policy actions," said the commentary, whose author was identified as Zeng Gang.

But "traditional methods" such as interest rate and exchange rate adjustments were of little use in this effort, Zeng said. Instead, regulators must strengthen supervision of markets to "prevent excessive dollar arbitrage activity disturbing the order of the international financial market", Zeng wrote.