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Govt warns of payback if yuan bill is passed

By Ding Qingfen and Zhao Yanrong | China Daily | Updated: 2011-11-01 11:07

BEIJING / NEW YORK - Chinese government will not sit idle if a United States bill targeting the yuan becomes law, said the Ministry of Commerce on Monday, warning that retaliation will come swiftly.

"The currency legislation proposed by the US would hurt the interests of both China and the US. We are strongly against it," said He Ning, a director-general at the Ministry of Commerce.

"If it eventually passes and becomes law, we cannot ignore it and will definitely reciprocate in kind," said He, who refused to elaborate. "We have readied ourselves with measures to deal with the possible outcome from the US."

He's remarks came as President Hu Jintao is expected to attend the G20 summit from Nov 3-4 in Cannes, France. Leaders from the 20 nations will discuss how to address the global economic recession and the spreading European debt crisis, among other pressing economic problems.

"I am not sure whether the Chinese currency (issue) will be talked about or not" during the G20 meeting, He said.

But officials from the European Union said last weekend they will pressure China to further appreciate the yuan during the G20.

He was directing his stern comments toward legislation passed earlier this month by the US Senate. The bill will allow the US to impose tariffs on Chinese goods if it finds that China is manipulating its allegedly undervalued currency.

The bill, which US lawmakers claim will help protect American jobs from filtering into China, will now be sent to the House of Representatives for their approval, which is unlikely to happen.

"Nations worldwide always like to target China and its policies, including its currency, when they have their own problems," He said.

The US unemployment rate has remained above 9 percent since April, although the country's economic growth returned to 2.5 percent in the third quarter, easing fears that the US economy was falling into a deeper recession. Economists have warned that the US recovery is precarious.

Chinese experts said US lawmakers are pushing off their economic problems to China by blaming the central government's policies on the yuan exchange rate, especially as the 2012 US presidential election draws near.

China's yuan has so far appreciated 3.7 percent this year, and the nation continues to work at reducing inflation, said Vice-Minister of Finance Zhu Guangyao on Friday.

Zhou Xiaoyan, director of the Bureau of Fair Trade for Imports and Exports at the Ministry of Commerce, said recently that new trade protectionism measures targeting Chinese exports is rising, citing the US economic slowdown and Europe's debt woes.

Cheng Siwei, former vice-chairman of the Standing Committee of the National People's Congress of China, called on the US to stop pressuring China on its economic policies

"Putting political pressure on Chinese currency is nonsense," Cheng said at the US-China Innovation and Cooperation conference on Monday.

China is reforming its currency policy, Cheng said, and the ultimate goal is to make the yuan freely exchangeable.

"The Congress' passing of the bill last month may be related to the coming election year, but the political pressure cannot really work on yuan's appreciation," he said.

Ceasing to hype up trade issues between China and US is an important way to solve the US' massive deficits, he added.

By August's end, US companies exported $66.1 billion in goods to China and imported $255.5 billion. The US deficit created by its trade in goods with China reached $273 billion last year and $226.88 billion in 2009, according to US Census Bureau.

Cheng said China mainly exports low-end products to US and imports high-end products and technology from the US.

"Low-end goods made in US are often much more expensive than the ones from China but if US limits its exports of high-end products to China, how can they make the trade balanced?" he asked.

Cheng also appealed for less stringent investment regulations for Chinese companies hoping to invest in the US. He pointed to the failed bid by China National Offshore Oil Corp, one of the three major oil companies in China, for California-based Unocal in 2005 due to "political opposition".

He said other Chinese plans to invest in US companies have failed, including the bid by Haier Group, China's largest home-appliance maker, for Maytag Corporation, an American house appliance brand, in 2005.

"Even a washing machine is related to national security? I don't think so," Cheng said. "We encourage Chinese companies to invest abroad. US needs to reduce the limitations on China's investment here. Otherwise, it's hard for us to encourage them as well as helping with American economic recovery."

Cheng said he has been paying close attention to the American economy recovery and thinks the economy is still unstable.

The US Department of Commerce said last week that the economy expanded by 2.5 percent from July to September, nearly doubling the 1.3 percent growth from April to June.

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