The US Treasury avoided labeling China a currency manipulator in a much delayed report to Congress on Thursday, but maintained that the yuan was undervalued.
Three weeks after the Chinese central bank vowed to loosen its currency controls amid mounting international pressure, the US Treasury said the yuan “remains undervalued,” stopping short of branding Beijing a manipulator.
“What matters is how far and how fast the renminbi [yuan] appreciates,” Treasury Secretary Timothy Geithner said in the semiannual report to Congress.
“We will closely and regularly monitor the appreciation of the renminbi and will continue to work towards expanded US export opportunities in China that support employment in the United States, in close consultation with Congress,” he said.
By law, the government is required to report whether any foreign economy manipulates its currency against the US dollar.
But the verdict earned the ire of US lawmakers bent on imposing trade sanctions on Beijing for allegedly manipulating the yuan for trade advantages.
“This report is as disappointing as it is unsurprising. It’s clear it will take an act of Congress to do the obvious and call China out for its currency manipulation,” said Senator Charles Schumer, a lawmaker from US President Barack Obama’s Democratic party spearheading the move to impose the sanctions.
Schumer’s statement did not say when lawmakers would move on legislation introduced in Congress they said would treat “currency manipulation” as an illegal subsidy and enable US authorities to impose tariffs on Chinese goods.
“If we want China to play by the rules and stop manipulating the yuan, then this administration has to stop putting out weak-kneed reports,” said Republican Senator Orrin Hatch, calling Geithner’s report “laughable.”
Representative Sander Levin, a Democrat who chairs the powerful House Ways and Means Committee, wanted Congress and the Obama administration to “fully explore the option of challenging” China’s currency practices through a complaint at the WTO.
Some lawmakers are urging caution.
Democratic Senator Max Baucus, who heads the key Senate finance committee, said he expected Beijing to take significant steps soon to appreciate its currency and urged Obama to be “vigilant in pushing China on this issue.”
Geithner’s report was scheduled to have been sent to Congress in April but he had postponed it in a bid to give China more time to make the yuan flexible.
Just ahead of a recent summit of the G20 key nations, a de facto deadline set by Washington, Beijing announced on June 19 that it would make the yuan rate more flexible.
The yuan has gained 0.7 percent against the greenback since then.
For nearly two years, the yuan had been effectively pegged at about 6.8 to the US dollar, which critics say undervalues the currency by as much as 40 percent and gives Chinese exporters an unfair trade advantage.
Geithner on Thursday cited various factors to back his claim that the yuan was undervalued, including the fact that China was persistently building up its foreign reserves’ arsenal and chalking up current account surpluses.
“China’s continued foreign reserve accumulation, the limited appreciation of China’s real effective exchange rate relative to rapid productivity growth in the traded goods sector and the persistence of current account surpluses even during a period when China’s trading partners were in deep recession together suggest that the renminbi remains undervalued,” he said.
Geithner also called on China to resume making public a key report by the IMF on its exchange rate policy and other economic assessments.
US lawmakers have demanded that Beijing authorize the release of an IMF staff report, which forms part of China’s annual “Article IV” consultations with the fund.
“IMF Article IV reports on China, when they have been published, have provided valuable information about assessments of macroeconomic and exchange rate policy. We encourage China to resume publication of its Article IV Reports,” Geithner said.
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