U.S. Says China Not Manipulating Currency

[tonado]

If Chinese currency rate changes, then it will be more expensive to stay in China using US dollars.

 

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U.S. Says China Not Manipulating Currency

10/30/2003

 

WASHINGTON (Reuters) - China is not manipulating its currency exchange rates to gain an unfair advantage over U.S. manufacturers, but its currency policy is "not appropriate," the U.S. Treasury Department concluded in a report to Congress on Thursday.

 

In a semiannual report on global exchange-rate practices, the Treasury gave a pass to China and all other key trading partners while also vowing to keep up pressure on China to let market forces set the value for its yuan currency.

 

The report said "no major trading partner of the United States meets the technical requirements" for being designated a currency manipulator, which would have required negotiations and potential U.S. trade action.

 

The conclusion was certain to meet a hostile reaction before the Senate Banking Committee, where Treasury Secretary John Snow was summoned to testify.

 

U.S. manufacturers and lawmakers argue a pegged currency gives China an unfair trade advantage, which has cost millions of jobs and sapped U.S. competitiveness in export markets.

 

The Treasury said it was actively urging China to end its decade-old practice of pegging its yuan currency at about 8.28 to the U.S. dollar.

 

CHINA MUST CHANGE

 

"This policy is not appropriate for a major economy like China and should be changed," said the report to Congress on foreign exchange policy for the first half of 2003.

 

In prepared testimony, Snow said the mere existence of a currency peg or of intervention by countries in foreign exchange markets to alter currencies' values was not enough to cause a country to be named a manipulator.

 

He said the Bush administration "is aggressively encouraging our major trading partners to adopt policies that promote flexible market-based exchange rates" and noted he had traveled to Beijing last month to say so directly to Chinese officials.

 

Initial reaction in financial markets was the report broke little new ground and was unsurprising.

 

"They have couched the report in language they have used before; that they have raised issues with Japan and China but they are not accusing them," said Larry Brickman, a currency strategist with Banc of America Securities in New York.

 

"China now has an opportunity to show leadership on the important global issue of exchange rate flexibility," Snow said. He said there were "encouraging" signs China was taking steps to do so but said Beijing was worried that moving too rapidly might put its relatively weak banking system in jeopardy.

 

WANT STRONG U.S. DOLLAR

 

He repeated that a strong U.S. dollar "is in the U.S. national interest," anticipating lawmakers would press him to say whether that remained U.S. policy.

 

Snow also said the Treasury was "actively engaged" with Japan -- which again intervened in foreign exchange markets overnight by selling yen to buy dollars -- on its exchange-rate policies.

 

The report said the Japanese government spent $59 billion in the first half of 2003, buying dollars to prevent the yen from appreciating in value and giving Japanese products a pricing edge in foreign markets.

 

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[Guest hakkamike]

U.S. manufacturers and lawmakers argue a pegged currency gives China an unfair trade advantage, which has cost millions of jobs and sapped U.S. competitiveness in export markets.

 

I find that humorous.

Later, Michael Perez

[robhon]

I find that humorous.

                      Later, Michael Perez

 

Explain.

[MoonCarolCafe]

So China revalues it's currency to 4.2RMB/1USD... the balance in my BOC account is worth twice as much overnight ? I bet the IRS is still going to want a cut.

[chinadave2001]

As long as the RMB is a soft currency then the Chinese government can set whatever value it likes. I can't help but wonder if our annoncement that the chinese currency is not "manipulated" is at all related to China's declaration today that North Korea was willing to negotiate....You scratch my back, I'll scratch yours....

dave

[Francine-gg]

Dear Beijing,

 

Please do not re-value the Yuan, I really enjoy getting an 8:1 purchase advantage when I visit China......

 

Thank you

[frank1538]

I'll eat my hat the day that Beijing lets the yuan float against the dollar.

 

My take on this is that this is pure posturing by the administration. Me thinks the government speaketh with forked tongue. Let the yuan float (good domestic politics), but, by the way, China is in compliance with US laws on currency manipulation (good foregin diplomacy).

 

Let's see, if the cost of Chinese goods increases significantly, I'm sure all the "lost" jobs will come back to the US, Yeh, via India, Mexico, Pakistan, and a host of other countries. Don't bet the ranch, Dubya.

[Mick]

So China revalues it's currency to 4.2RMB/1USD... the balance in my BOC account is worth twice as much overnight ? I bet the IRS is still going to want a cut.

You can count on it my friend!