The administration of US President Barack Obama on Friday declined to cite China for manipulating its currency to gain trade advantages against the US, but said the pace of the currency’s rise against the US dollar needed to be accelerated.
The US Treasury Department said that China has been allowing its currency to rise against the dollar since last June, but it said that Beijing needed to make more rapid progress. The US trade deficit with China hit a record high last year.
The department’s finding came in a report it must submit to -Congress every six months determining whether other countries are manipulating their currencies. US manufacturers have been pushing for China to be cited. That could result in penalty tariffs on Chinese imports.
China’s trade deficit with the US hit US$273 billion last year, the largest deficit the US has ever had with any country. Critics contend that Beijing is manipulating its currency to keep it undervalued against the dollar as a way of getting unfair trade advantages, an attack that has gained more support at a time of high unemployment in the US.
In the report, the Treasury Department noted that the Chinese yuan had risen by 5.1 percent in value against the US dollar since last June, when Beijing announced that it would resume allowing its currency to appreciate.
The report said the appreciation was 9 percent on an annual basis when taking into account the different inflation rates between the two countries.
However, private economists said that on a trade basis, the yuan really hasn’t moved much at all, given that while it has been rising against the US dollar, the dollar has been falling against many other currencies. Because of this, they contend that China will likely see its global trade surplus rise significantly this year.
Analysts said that the Treasury’s refusal to cite China was not unexpected, but the decision will likely add fuel to complaints that Washington needs to take a tougher approach on trade issues with China.
“The continued high bilateral trade deficit that the US runs with China and a weak US labor market will keep China’s currency policy on the radar of US politicians for some time to come,” said Eswar Prasad, a China expert at Cornell University.
Nicholas Lardy, an economist at the Peterson Institute for -International Economics, a Washington think tank, said that while China’s trade surplus with the US and the rest of the world shrank during the global recession, it is likely to rise significantly this year, adding to the pressure on policymakers to do something.
Asked for a reaction to the report, an official at the Chinese embassy in Washington said that China’s currency has been rising in value against the US dollar and that would continue.
“China will further push forward the reform of the renminbi [yuan] exchange rate regime under the principles of independent decision-making, controllability and graduality,” embassy spokesman Wang Baodong (王寶東) said.