China official rejects U.S. complaints on currency

WASHINGTON Wed Mar 24, 2010 5:39pm EDT

An employee counts yuan banknotes next to U.S. dollar banknotes at a branch of Bank of China in Changzhi, Shanxi province, March 9, 2010. REUTERS/Stringer

An employee counts yuan banknotes next to U.S. dollar banknotes at a branch of Bank of China in Changzhi, Shanxi province, March 9, 2010.

Credit: Reuters/Stringer

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WASHINGTON (Reuters) - A Chinese official said on Wednesday China would reform its currency policy gradually and keep the exchange rate stable, rejecting mounting U.S. calls to allow the yuan to rise more quickly.

Chinese Vice Commerce Minister Zhong Shan, in Washington amid U.S.-China trade and political tensions, said changing the exchange rate was not the way to fix a huge bilateral trade gap and could upset the world economy.

"Revaluing the renminbi is not a good recipe for solving problems," he told the U.S. Chamber of Commerce, according to a transcript obtained by Reuters.

"It is in nobody's interest, China's, the U.S.' or other countries', to see big ups in the renminbi or big downs in the dollar," Zhong said.

U.S. Treasury Secretary Timothy Geithner said it was critical for China to allow its currency to rise. "We can't force them to make that change," he said in an interview with CNN.

"But it is very important that they let it start to appreciate again. And I think many of them understand that," he said, according to an advance transcript provided by CNN.

Many U.S. economists estimate China's currency is undervalued by up to 40 percent. They say that gives China an unfair price advantage in international trade, takes jobs away from other countries and adds to global financial distortions.

With the U.S. economy having shed 8.4 million jobs since December 2007, lawmakers have focused on China's currency. Senators are crafting a law that would slap import duties on Chinese goods to offset the low value of its currency.

Sponsors of the bill, Democratic Senator Charles Schumer and Republican Senator Lindsey Graham, also want the Obama administration to formally label China a currency manipulator in a semi-annual Treasury Department report due on April 15.


The administration twice rejected that route in 2009, as did the Bush administration. Wary of straining U.S.-China relations, Obama has instead pressed Beijing to move to a "more market-oriented exchange rate."

U.S. House Ways and Means Committee Chairman Sander Levin, an influential Democratic Party lawmaker, kept up the chorus of criticism of Beijing's currency policies on Wednesday.

"What seems undisputed ... is that China has a persistent economic strategy, a policy, key to which is the pegging of its currency to the dollar at an undervalued rate," he said.

Levin said he intended to hold "some vigorous discussions this week" with Treasury officials on the currency issue.

Declaring China a currency manipulator would require Geithner to hold talks with China, bilaterally or at the International Monetary Fund. The IMF called the yuan "substantially undervalued" on March 1.

Niall Ferguson, a history and business professor at Harvard University, told Levin's hearing that failing to name China as a manipulator will make the United States "look like the wimps of the Western world."

Many economists say a revaluation of the yuan would not bring back U.S. jobs because many of the labor-intensive products Americans buy from China have not been made in the United States for decades.

Some warn against moves that would trigger a trade war with China, which holds $889 billion of U.S. government bonds and whose help is needed to tame the nuclear ambitions of Iran.

Joseph Brusuelas, chief economist at Brusuelas Analytics, said in a research report that he saw "little question regarding whether Beijing targets the level of its currency." But he argues against naming China a manipulator.

"Such a finding will exacerbate economic tensions between the U.S.-China and could push the Obama administration to adopt a counterproductive set of policies that would endanger the nascent global economic recovery," he wrote.

Ferguson urged naming China a manipulator but, citing the U.S. tariffs that helped trigger the 1930s Great Depression, added: "I do not think this is a good moment to threaten or impose retaliatory tariffs against China."


Zhong warned U.S. business leaders that a stronger yuan might not be a solution to American economic problems.

"A dip in the value of dollar will undoubtedly bring great repercussions to the global financial system and the world economy," he told the U.S. Chamber of Commerce.

"The right way to reach trade balance between China and the U.S. should be expanding exports from the U.S. to China, rather than limiting China's exports to the U.S.," Zhong added.

U.S. exports to China hit about $70 billion in 2009, unchanged from 2008. In a global economic slowdown, China was the third-biggest market for U.S. exporters and it remains the fastest-growing one.

But U.S. business leaders increasingly complain they are hitting a protectionist wall in China as a result of government policies favoring domestic industries and that Beijing is increasing state involvement in the economy.

"Regrettably, China is moving in a direction that is inconsistent with international best practice in developing an innovative economy," said Myron Brilliant, senior vice president of the U.S. Chamber of Commerce.

China's policies are undermining business leaders who have long defended Beijing from U.S. protectionist pressures.

"The ongoing policy approaches by China are eroding the support of their long-standing advocates in the United States, diminishing the many good arguments we have used historically in support of this relationship," Brilliant said.

China and the United States have been at odds throughout 2010 -- over issues such as Google's decision to defy Chinese Internet censorship, U.S. weapons sales to Taiwan, Tibet and sanctions against Iran's nuclear program.

Zhong also visited the U.S. Treasury Department, Commerce Department and the Trade Representative's office. It was not clear whether he would meet lawmakers during his two-day visit.

A Commerce Department official said U.S. officials who hosted Zhong discussed trade remedy issues, anti-dumping and countervailing duties.

"We also took the opportunity to raise our broader trade-related concerns, such as indigenous innovation," she said, referring to Beijing's buy-Chinese directives that U.S. businesses in China cite as a major and growing trade barrier.

(Writing by Paul Eckert; Editing by Andrew Hay and Dan Grebler)

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Comments (7)
jwws9999 wrote:
it’s time to place tariffs on all imports from china, the proper amount would be the exact same tariffs and quotas they put on our exports to them. Trade with China will go down as the biggest economic mistake in US History

Mar 24, 2010 2:30pm EDT  --  Report as abuse
creasybear27 wrote:
It’s time for America to het very tough with China who treats there people so badly,I would put very strong tariffs on China and default on the money we own them.China is hacking our government and military counputer and much more,I might even tell China we will noy buy any of your products any more,China is try to become the most advanced military in the world and stealing our high tech stuff plus they have the worst human rights in the world.Screw China and id we don’t get tough with them they will become the most powerful military in the world-there spending so much money on that now,just cut them off and pull all our companies out of there country as they steal our high tech at them.Stop all chinese from coming here to study at our colleges.All the cheap throw away product we but from them that money goes to there military build up and ther going to try to take Tawian.Know more cheap Chinese products in America,We can make our own products or get them from a better country with fare trade.

Mar 24, 2010 3:10pm EDT  --  Report as abuse
mnmnmmnnmnmn wrote:
I couldnt believe what I’ve read from upstairs. You’re so narrow-minded. Without us Chinese, you could never have made so far. Yes we do sell stuff cheap, beacause we have a cheap buyer across the ocean who are only willing to pay so MUCH. How much you get depends on how much you pay. We have good products that are more expensive, but you guys are too cheap to buy those. Looking how many people are living their lives no dollar stores will give you the answer.

Without us importing from you guys, how many more people are going to hang their house keys to the banks.

American people should really change your point of view. It’s US depends on Chinda, Not vice versa.

More people are coming to the State to attend college, to learn new technologies. That’s called strategy. If you call that “steal”, think about several hundred years ago, who came to china and stole our gun powder technology and used that to attack us? you wanna play the game, now it’s the time to pay back.

Military wise, there’re some area in which US cannot even compete with us. Taiwan is our own business, you guys better step back or you will get hurt. Mind your own business and take care of your own people.

Good friendship is the only way to go.

Mar 24, 2010 7:16pm EDT  --  Report as abuse
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