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China, Japan manipulate currencies: US companies

The central banks of China, Japan, South Korea and Taiwan have spent more than US$1 trillion to "manipulate" their currencies to keep them artificially low and their exports cheap, US manufacturers charged.

The Coalition for a Sound Dollar, a group of 60 trade and business associations, said China's accumulation of US$316 billion in foreign reserves proves it's buying dollars to keep the yuan depressed. Unless China ends that practice it will lead to a backlash against free trade in the US, the groups say.

"China is our most pressing trade issue with our member companies, bar none," Frank Vargo, vice president of the National Association of Manufacturers, which leads the coalition and represents 14,000 US companies in an interview in Washington.

"The protectionist demands are growing, and they're not going away," he said.

US companies say China was able to run up a record US$103 billion trade surplus with the US last year because its currency allowed it to sell goods more cheaply than other countries. That deficit has led to a surge in complaints to the US government from textile makers, garlic growers and television manufacturers.

Since 1995, China has pegged the yuan at about 8.3 to the dollar. The dollar has fallen about 12 percent against the euro this year and more than 20 percent in the last 12 months, sending the Chinese currency down in value as well. Vargo estimates the Chinese currency is as much as 40 percent undervalued.

"We have to have a level playing field," he said.

Goldman Sachs Group Inc, the world's third-biggest securities firm, said in a report that China may let the yuan trade at 2.5 percent above or below its current level within six months and 5 percent above or below the rate a year from now.

Loosening the peg may cause the Chinese currency to jump, analysts say.

The coalition released an Asian Currency Manipulation Monitor, showing how tension about exchange rates is growing in the US, as the manufacturing sector is in recession. In addition to China, the coalition complained that Japan's central bank sold yen and bought US$42.8 billion of US dollars last month.

Japan's yen sales are "an outright subsidy for its manufacturers," Steve Collins, president of the Automotive Trade Policy Council, said in a statement.

Taiwan's central bank is generally a significant participant in the local forex market by using its ample foreign reserves to support the local currency, analysts said.

Last month the nation saw a record US$175.2 billion foreign reserves, the world's third largest following those of Japan and China.

George Chou (周阿定), director general of this country's central bank's foreign exchange department, wasn't available for comment yesterday.

But Central Bank governor Perng Fai-nan (彭淮南) had said in April in the legislature that the bank would intervene in local forex market only when there is a dramatic fluctuation in the value of the New Taiwan dollar.
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