US Treasury: China not manipulating yuan

08:03, July 09, 2010      

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The Obama administration said that China was not "manipulating" it currency in a delayed report to Congress Thursday, a rule that would be well received by Beijing authorities and help the relations between the two giant economies.

However, the U.S. Treasury's semiannual report, originally due on April 15, said the yuan remains somewhat "undervalued", but noted Beijing had made a significant effort in June by once again ending a peg between the value of the yuan and the dollar.

Since June, the yuan has risen about 0.8 percent against the greenback.

China's currency has risen rapidly against the euro as Europe wrestles with its debt crisis, gaining 4.5 percent since the start of June and 14.2 percent so far this year. The yuan has also gained against Japanese yen, Hong Kong dollars, British pound, and other world currencies.

"What matters is how far and how fast the yuan appreciates," Treasury Secretary Timothy Geithner said in a statement issued with the report yesterday.

"We will closely and regularly monitor the appreciation of their currency and will continue to work toward expanded U.S. export opportunities in China," Geithner said.

Eswar Prasad, a senior fellow at the Brookings Institution, praised the Treasury report for striking "a fine balance -- continuing to push China to allow its currency to appreciate by noting the currency's undervaluation but not letting things boil over by calling China a currency manipulator."

Worried about diminishing U.S. jobs and facing an uphill battle in the October midterm elections, some U.S. lawmakers claim a misalignment in China's yuan currency distorts trade and grabs U.S. jobs.

The Treasury's semiannual reports on exchange rate policies of foreign countries examine whether a country is manipulating its currency "for purposes of preventing effective balance of payments adjustments or gaining unfair competitive trade advantage in international law."

One week before a meeting of group of 20 leaders in Canada last month, China freed its currency from a nearly two-year-old peg to the dollar, because Beijing wants to maintain its export capability in the aftermath of the global economic crisis.

On Capitol Hill, the chairman of the U.S. House of Representatives Ways and Means Committee, Sander Levin, said that U.S. should keep "all options" open to pressure China on its currency.

Levin said that Beijing's move to end the currency peg was "a first step, but clearly, only that "and suggested all remedies should be kept handy to ensure that yuan appreciation continues".

The head of the Senate Banking Committee, Christopher Dodd, another Democrat, said he planned to summon Geithner to testify on the report, but he did not set a date.

Derek Scissors, China economist at the Heritage Foundation, said the Obama administration's decision takes the heat off for now as Washington gears up for congressional elections in November.

U.S. Treasury Department said the size of China's foreign currency reserves is an indication of how its currency is "undervalued". In the period from February-December 2009, China boosted its reserves by $487 billion, six times more than any other country as Beijing intervened to hold the yuan pegged to the U.S. dollar, Treasury data said.

People's Daily Online / Agencies


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