US President Barack Obama’s administration on Tuesday declined to label China a currency manipulator after seeing recent increases in the value of the yuan compared to the US dollar.
The decision angered unions and lawmakers that have accused Beijing of artificially holding down the value of its currency to gain trade advantages. The US Department of the Treasury said the yuan has appreciated 12 percent against the US dollar in the past 18 months, after adjusting for inflation. In addition, the department said in a semi-annual report that China promised at two high-level meetings last month to make the yuan’s exchange rate more flexible.
Still, the yuan is “substantially undervalued” and its appreciation “is insufficient and more progress is needed,” the report noted. The department will “press for policy changes that yield greater exchange rate flexibility” and “level the playing field.”
The currency report evaluates exchange rate policies of all major US trading partners. It was scheduled to be released on Oct. 15, but the administration delayed its release until after last month’s meetings.
Former Massachusetts governor Mitt Romney, a leading candidate for the Republican US presidential nomination, criticized the administration for refusing to cite China for manipulating its currency. Romney has said that, if elected, he would take that step on his first day in office. That could lead to trade sanctions against China.
Scott Paul, executive director of the Alliance for American Manufacturing, also questioned the decision.
“I’m disappointed that President Obama has now formally refused six times to cite China for its currency manipulation, a practice which has contributed to the loss of hundreds of thousands of American manufacturing jobs,” Paul said.
Paul urged the US House of Representatives to pass legislation approved by the US Senate that would make it easier to cite China for unfairly manipulating its currency. Many manufacturers argue that China’s currency is undervalued by as much as 40 percent.
US House Speaker John Boehner, a Republican, has opposed the measure.
China has recently taken action that could result in the yuan appreciating without prodding from the US.
China and Japan agreed this week to accept the others’ currency when trading. Currently, they each convert their currency to US dollars. That has made trade between the two Asian economic giants more expensive.
The change could reduce the importance of the US dollar in Asia, the world’s fastest-growing region. However, it could also help the yuan trade more freely on international markets, which could result in it appreciating against the US dollar.