Ber­nanke blames Congress as China flexes eco­nomic mus­cles

The China Post - - INTERNATIONAL -

For­mer Fed­eral Re­serve Chair­man Ben Ber­nanke on Tues­day re­buked U.S. law­mak­ers for al­low­ing China to steal a march with a new Asian bank that threat­ens to up­end Wash­ing­ton’s over­sight of the world eco­nomic or­der.

Speak­ing in Hong Kong, Ber­nanke also echoed the In­ter­na­tional Mon­e­tary Fund (IMF) in say­ing China’s cur­rency was “much bet­ter aligned” to­day, af­ter West­ern crit­i­cism that Bei­jing cheats in global trade by dis­tort­ing the yuan’s ex­change rate.

With the launch of the Asian In­fra­struc­ture In­vest­ment Bank (AIIB) and its plans to grad­u­ally roll out the yuan as an in­ter­na­tional cur­rency, China is flex­ing its eco­nomic mus­cles to the con­ster­na­tion of some U.S. crit­ics.

But, Ber­nanke said, the U.S. Congress only had it­self to blame af­ter re­fus­ing to rat­ify re­forms agreed in 2010 that would have given greater clout to China and other emerg­ing pow­ers in the IMF.

It re­mains “bet­ter to have a global uni­fied sys­tem” play­ing to stan­dard­ised rules, he told an au­di­ence of in­vestors on the side­lines of the World Busi­ness Fo­rum in Hong Kong.

“But I un­der­stand en­tirely that if the Congress will not al­low the (IMF’s) gov­er­nance sys­tem to ap­pro­pri­ately re­flect the chang­ing eco­nomic weights, then I un­der­stand why other coun­tries would say ‘let’s take our mar­bles and go home’,” Ber­nanke said.

“It’s not a good devel­op­ment” to have com­pet­ing in­sti­tu­tions, “but I can un­der­stand why China and other coun­tries might want to say ‘well, we’re go­ing to set up our own sys­tem.’”

Ber­nanke De­fends His Record

How­ever, Ber­nanke noted that pri­vate cap­i­tal was to­day vastly big­ger than in 1944 when the IMF and World Bank were set up, pre­sent­ing an­other out­let for in­fra­struc­ture bor­row­ing be­yond gov­ern­ment- backed lenders.

Ber­nanke said Bei­jing was right to stick to “in­cre­men­tal steps” that could one day turn the yuan into a ma­jor re­serve cur­rency along­side the dollar and euro.

The yuan’s value, he added, had “ap­pre­ci­ated con­sid­er­ably” over the past five years and was closer to fair value. That view is in line with a new IMF ap­praisal but at odds with the U.S. Trea­sury, which still in­sists the cur­rency is too cheap.

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