Despite pressure from the US Congress, the Bush administration
yesterday refused to cite China as a country that manipulates its
currency to gain an unfair trade advantage.
In its semi-annual currency report, the administration said that
China did not fit the technical profile of a country that is
manipulating its currency.
The Treasury Department said while it was "obvious that the
Chinese government was controlling the value of its currency
against the dollar," it could not determine that this action was
being done for the purpose of "gaining unfair competitive advantage
in international trade." That is the standard set in the law.
But it said China's currency is undervalued and pledged to keep
pushing for further appreciation.
A group of Senators said yesterday they would introduce
legislation to make it easier for the United States to pursue
economic sanctions against China if the country does not allow its
currency to rise more quickly against the dollar.
But Chinese analysts warned that any unilateral punitive
measures would backfire and incur tit-for-tat measures.
Beijing "will respond" if the legislation is passed and leads to
higher tariffs on Chinese goods, Foreign Ministry spokesman Qin
Gang said earlier.
Many economists agree that the US trade deficit stems from
structural economic problems, such as a low savings rate and
unrestrained consumption. The yuan revaluation will not help reduce
its trade deficit, but shift the source of imports to other
low-cost countries.
The US Senators' move to push for legislation against China,
therefore, is not a rational move but an unleashing of emotion,
Chen Xingdong, deputy managing director and chief economist of BNP
Paribas Peregrine Securities, told China Daily.
"Politicians run the show to win voters."
He said it is "quite likely" that the legislation will be passed
by Congress, but it remains to be seen whether it secures a
two-thirds majority, which will override a presidential veto.
The legislation, in a sense, may not be a bad thing, said Mei
Xinyu, a researcher from the Chinese Academy of International Trade
and Economic Cooperation attached to the Ministry of Commerce. It
will disillusion the US public as reduced Sino-US trade will hurt
the interests of US consumers and companies.
The yuan, meanwhile, has become more flexible as it fluctuated
more dramatically in recent days.
The renminbi's central parity rate was 7.6282 against the US
dollar yesterday, up 0.25 percent from Tuesday's 7.6475 and the
second-largest single-day rise after Tuesday's 0.4 percent
rise.
(China Daily June 14, 2007)