The Financial Pages: What the leading financial papers’ leading editorials have to say.

The Chinese yuan.

The Financial Times’ editorial page today looked positively at Chinese currency revaluation; warned that the UK’s economic recovery is by no means assured; and urged France to “be bolder” in cutting pensions.

The Financial Times and US President Barack Obama both lauded China for its move to abandon the renminbi’s peg against the US dollar, just a week before the G20 meeting in Toronto where the nation’s currency was expected to draw fire. “Slowly but surely, Beijing should allow the renminbi to find a market-determined equilibrium,” the paper concluded. “Anything short of that won’t satisfy Washington. Nor will it, in the long run, be in China’s best interests either.”

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The UK’s Chancellor, George Osborne, has been radiating an “aura of infallibility”. But after releasing the emergency budget tomorrow, 22 June, “he will not be able to maintain that pretence.” The newly create Office for Budget Responsibility, the Financial Times claimed, recently released a report that indicates just how “uncertain” the state’s economic forecasts are. “Mr Osborne should set out a Budget that acknowledges the dangers that still circle the British economy,” the paper urged, adding that he should also “reveal an emergency plan of action to be followed were the UK to fall into a deep recession.” The paper concluded, “Mr Osborne might not believe the worst is coming, but he should plan for it nonetheless.”

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The Financial Times praised French President Nicolas Sarkozy’s new-found zeal for overhauling the French pension scheme, including raising the state pension age from 60 to 62. “It is a bold move in the right direction, but Mr Sarkozy must be bolder still if the reforms are to produce the shift that is required to make the system sustainable,” the paper opined. It added, speaking directly (and in a slightly school marmish tone) to the protesting French, “However much French workers treasure the right to retire early, these are straitened times. Plenty of workers across Europe are making more immediate and painful sacrifices as governments seek to put public finances in order.”

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Reuters on China’s revaluation:

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The Wall Street Journal’s editorial page today also dealt with China’s currency revaluation, though taking a particularly jaundiced view on the matter, and complained that the Gulf oil disaster is breathing new life into the discredited theory of regulation, the precautionary principle.

“The best that can be said for China’s weekend decision to drop its dollar peg and again adopt more ‘exchange-rate flexibility’ is that it may avert a trade war,” The Wall Street Journal groused in a lengthy piece on China’s decision. “What no one should believe is that China’s move will ‘rebalance’ the world economy or send manufacturing jobs rushing back to America.” The Journal noted the timing of the move – just before the G20 summit – and attributing it to China’s desire to keep its exchange rate from becoming the focus of the meeting, rather than “the failures of U.S. and European economic policies”. A revalued yuan (or renminbi) will not “rebalance” the global economy or reduce the US trade deficit, the paper claimed: The move could drive some Chinese manufacturing to neighbouring lower cost nations, meaning that Americans will still pay more for imports and “Chinese producers will be forced to become even more competitive and thus a bigger global challenge to U.S. companies.” Moreover, the yuan has merely become a “scapegoat” for Washington’s policy mistakes, the paper claimed, and is obscuring what The Journal says is the US Federal Reserve’s “extraordinarily loose monetary policy”.

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The oil leak disaster in the Gulf of Mexico is busily reviving the “thoroughly discredited theory of regulation known as the precautionary principle”, The Wall Street Journal claimed today. “This principle holds that government should attempt to prevent any risk—regardless of the costs involved, however minor the benefits and even without understanding what those risks really are.” Politicians’ demands for a permanent moratorium on offshore drilling, as well as tightened safety measures, is ill-founded and has the potential to cause “severe economic damage to the oil-and-gas business when one in every 10 Americans is out of work”, the paper claimed. “With the reinvigoration of the precautionary principle, the country could use a little empiricism.”

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