US declines to cite China as currency manipulator
January 1, 2012 Leave a comment
The Obama administration on Tuesday declined to label China a currency manipulator after seeing recent increases in the value of the yuan compared to the dollar.
The decision angered some manufacturing groups, which have accused Beijing of artificially holding down the value of its currency to gain trade advantages. A cheaper yuan makes Chinese goods less expensive when they are shipped to the United States. It also makes U.S. goods more expensive in China. Both could increase the U.S. trade deficit with China, which is on pace to hit a record high this year.
The Treasury Department said the yuan has appreciated 12 percent against the dollar in the past 18 months, after adjusting for inflation. In addition, the department said in a semi-annual report that China promised at two high-level meetings last month to make the yuan’s exchange rate more flexible.
Still, yuan is “substantially undervalued” and its appreciation “is insufficient and more progress is needed,” the report noted. The department will “press for policy changes that yield greater exchange rate flexibility” and “level the playing field.”
The currency report evaluates exchange rate policies of all major U.S. trading partners. It was scheduled to be released on Oct. 15, but the administration delayed its release until after last month’s meetings.
Former Massachusetts Governor Mitt Romney, a leading candidate for the Republican presidential nomination, has criticized the administration for refusing to cite China for manipulating its currency. Romney said in October that, if elected, he would take that step on his first day in office. That could lead to trade sanctions against China.
Scott Paul, executive director of the Alliance for American Manufacturing, also questioned the decision.
“I’m disappointed that President Obama has now formally refused six times to cite China for its currency manipulation, a practice which has contributed to the loss of hundreds of thousands of American manufacturing jobs,” Paul said.
Paul urged the House to pass legislation approved by the Senate that would make it easier to cite China for unfairly manipulating its currency. Many manufacturers argue that China’s currency is undervalued by as much as 40 percent.
House Speaker John Boehner, R-Ohio, has opposed the measure.
China has recently taken action that could result in the yuan appreciating without prodding from the U.S.
China and Japan agreed this week to accept the others’ currency when trading. Currently, they each convert their currency to dollars. That has made trade between the two Asian economic giants more expensive.
The change could reduce the importance of the dollar in Asia, the world’s fastest-growing region. But it could also help the yuan trade more freely on international markets, which could result in it appreciating against the dollar.