China’s currency statistics correct, U.S. says

WASHINGTON (AP) – The Bush administration on Monday determined that China was not manipulating its currency to gain economic advantages but 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 submit to Congress every six months, was certain to disappoint critics who contend that Chinese currency practices play a large role in America’s soaring trade deficits.

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 that 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 that it was allowing 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 allow the currency to fluctuate by as much as 0.3 percent on a daily basis. However, over the past four months, the Chinese yuan has been essentially unchanged in value.

Snow led a U.S. group which included Federal Reserve Chairman Alan Greenspan to China in October to urge the country’s government to allow a greater revaluation of the yuan. President Bush made a similar appeal to Chinese leaders this month when he visited China.

“It is imperative that China move toward greater flexibility as quickly as possible,” Snow said in a statement accompanying Monday’s report.

He said the administration would focus on China’s actions in preparing the next currency report to Congress, which will be due in April. He said China’s leaders have “committed repeatedly” to introducing more flexibility.

If the administration had found that China was manipulating its currency to gain trade advantages, that finding would have triggered consultations between the two countries.

It could have eventually led to trade sanctions being imposed by the U.S. government against Chinese goods if the United States was able to win a case on the issue before the International Monetary Fund.

American lawmakers, unhappy with the slow pace of negotiations, have introduced legislation to impose penalty tariffs of 27.5 percent on all Chinese goods unless China allows a greater revaluation of its currency.

Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., the leading supporters of this legislation, have said they will bring up their measure by next March unless China shows greater movement in allowing the value of its currency to rise.

“There is no doubt in the minds of most economists who have studied this issue that China is manipulating its currency,” the two senators said in a joint statement.

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