Treasury: China Isn’t Currency Manipulator Under US Law

China isn’t a currency manipulator under U.S. law, though the yuan “remains significantly undervalued” and needs to rise further, the Treasury Department said.

China “has substantially reduced the level of official intervention in exchange markets since the third quarter of 2011,” the Treasury said in a statement accompanying its semi- annual currency report to Congress yesterday. The yuan has gained 9.3 percent in nominal terms and 12.6 percent in real terms against the dollar since June 2010, the Treasury said.

“It appears that the strategy of the last two administrations to use diplomacy rather than confrontation in dealing with the yuan’s value is having some positive results,” William Reinsch, president of the National Foreign Trade Council, a Washington-based business group, said in an e-mail after the report. “There is clearly room for further appreciation, however.”

In declining to brand China a manipulator, the Treasury cited the reduced intervention and “steps to liberalize controls on capital movements, as part of a broader plan to move to a more flexible exchange-rate regime.” The U.S. hasn’t designated another nation since 1994, when it named China.

Critics of China’s exchange-rate policies, including former Republican presidential candidate Mitt Romney, say the nation deliberately suppresses the value of its currency, making its goods cheaper in overseas markets and costing jobs in the U.S.

Same Rules

“This report all but admits China’s currency is being manipulated, but stops short of saying so explicitly,” U.S. Senator Charles Schumer, a New York Democrat, said in a statement. “The formal designation matters because there can be no penalties without it. It’s time for the Obama administration to rip off the Band-Aid, and force China to play by the same rules as all other countries.”

Read more of this post

Come On, China, Buy Our Stuff!

A Gap Inc. store in Shanghai, China.

A Gap Inc. store in Shanghai, China.

By NYT ADAM DAVIDSON    Published: January 25, 2012

The first time I visited China, in 2005, an American businessman living there told me that the country was so huge and was changing so fast that everything you heard about it was true, and so was the opposite. That still seems to be the case. China is the fastest-growing consumer market in the world, and American companies have made billions there. At the same time, Chinese consumers aren’t spending nearly as much as American companies had hoped. China has simultaneously become the greatest boon and the biggest disappointment.

It wasn’t supposed to be this way. In 2000, the United States forged its current economic relationship with China by permanently granting it most-favored-nation trade status and, eventually, helping the country enter the World Trade Organization. The unspoken deal, though, went something like this: China could make a lot of cheap goods, which would benefit U.S. consumers, even if it cost the country countless low-end manufacturing jobs. And rather than, say, fight for an extra bit of market share in Chicago, American multinationals could offset any losses because of competition by entering a country with more than a billion people — including the fastest-growing middle class in history — just about to buy their first refrigerators, TVs and cars. It was as if the United States added a magical 51st state, one that was bigger and grew faster than all the others. We would all be better off.

More than a decade later, many are waiting for the payoff. Certainly, lots of American companies have made money, but many actual workers have paid a real price. What went wrong? In part, American businesses assumed that a wealthier China would look like, well, America, says Paul French, a longtime Shanghai-based analyst with Access Asia-Mintel. He notes that Chinese consumers have spent far less than expected, and the money they do spend is less likely to be spent on American goods. Read more of this post

%d bloggers like this: