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.
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
But it said China's currency is undervalued and pledged to keep pushing for
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
"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
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.