U.S.: China Not Fixing Currency

WASHINGTON - JUNE 23: Treasury Secretary John Snow testifies before the Senate Finance Committee on "U.S.-China Economic Relations," June 23, 2005 in Washington, DC. The hearing focused on the U.S. trade deficit, the valuation of China's currency and the experiences of U.S. exporters seeking to gain market access in China.
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The Bush administration determined Monday that China was not manipulating its currency to gain economic advantages, but it still pressed the Chinese to move more quickly to allow the yuan's value to be set by market forces.

The administration's determination, made in a currency report it is required to give Congress every six months, disappointed critics who contend that Chinese currency practices play a large role in America's soaring trade deficit.

"The administration's lack of action today hurts all Americans by refusing to acknowledge the obvious — that China manipulates its currency," said Sen. Chuck Schumer, D-N.Y.

Schumer and Sen. Lindsey Graham, R-S.C., are leading sponsors of legislation that would impose 27.5 percent tariffs on all imports from China unless China does more to allow its currency to rise in value against the dollar.

While both lawmakers agreed earlier this month to refrain from bringing up their legislation while Mr. Bush was in China, Graham said Monday, "I expect in the near future, unless some dramatic change occurs, the Congress will speak loudly and forcefully on China's continuing currency manipulation."

Treasury Secretary John Snow said China's decision to allow a small revaluation of its currency last July had been a factor in deciding not to brand China a currency manipulator, but he said more must be done.

The United States had a trade deficit of $162 billion with China last year, the largest ever recorded with a single country, and this year's deficit is expected to approach $200 billion.

American manufacturers believe China has purposely kept its currency undervalued by as much as 40 percent, making Chinese goods cheaper for U.S. consumers and making American products more expensive in China.

China in July announced it was letting its currency, which had been pegged tightly to the U.S. dollar, to rise in value by 2.1 percent. The Chinese said they would let the currency fluctuate by as much as 0.3 percent on a daily basis. However, over the past four months, the Chinese yuan has risen by only an additional 0.3 percent.

Manufacturing groups expressed disappointment with the administration's lack of action as did members of Congress.