April 14, 2009 / 8:11 PM / 10 years ago

U.S. seen citing China on currency-business leader

WASHINGTON, April 14 (Reuters) - The Obama administration could label China as a currency manipulator when it takes its first official stab at the controversial issue in a report due on Wednesday, a top U.S. business official said.

“I expect them to label China a currency manipulator, with some ameliorative language to soften it a bit — which won’t make the Chinese any less irritated,” said Bill Reinsch, president of the National Foreign Trade Council, which represents major exporters such as Boeing (BA.N).

Reinsch, however, also said he expected the highly sensitive semi-annual U.S. Treasury Department report would be delayed, as routinely occurred during the administration of former President George W. Bush.

Asked if the report would be released on Wednesday, Treasury Department spokeswoman Heather Wong said she could only say the report would come “soon.”

The National Association of Manufacturers, the AFL-CIO labor federation and many other groups pressed the Bush administration for years to formally label China a currency manipulator in a semi-annual report on the exchange rate practices of major U.S. trading partners.

They accuse China of artificially depressing the value of its yuan currency CNY= CNY=CFXS to give its companies an unfair trade advantage.

President Barack Obama picked up that rhetoric during his election campaign last year.

Obama told the National Council of Textile Organizations in a letter just two weeks before his election “that the massive current account surpluses accumulated by China are directly related to its manipulation of its currency’s value.”

Earlier in the year, Obama provided the following written response to the Ohio Conference of Fair Trade:

“I recognize that China’s currency manipulation and domestic subsidies give it an unfair trade advantage and has led to U.S. job losses. The Bush administration has utterly failed to address this growing threat to U.S. business. I am committed to tackling this problem and ensuring that all trade manipulations are addressed by the U.S. government.”

U.S. Treasury Secretary Timothy Geithner angered China earlier this year when, in written responses to questions from the Senate Finance Committee, he repeated that Obama believed China was manipulating its currency.

Geithner later appeared to retreat from that statement, saying in February that Treasury would judge China’s currency “carefully, looking not just at what’s happening in China in the management of their exchange rate regime, but what’s happening globally at the time.”

Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, said he was anxiously awaiting the Obama administration’s official verdict on China’s currency practices but would not venture a guess what that might be.

Top Democrats on the House of Representatives Ways and Means Committee, in letter last month to Obama, noted the Bush administration was the only one not to label any country as a currency manipulator since the report was created in 1988.

“China’s massive, prolonged, one-way and sterilized intervention in the currency market, its unprecedented foreign exchange accumulation ($1.9 trillion), and its massive current account surplus demonstrate that, once again, China is manipulating its currency,” the lawmakers said. (Reporting by Doug Palmer; Editing by James Dalgleish)

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