|
Us says china not manipulating currency { October 30 2003 } Original Source Link: (May no longer be active)
http://news.moneycentral.msn.com/breaking/breakingnewsarticle.asp?feed=OBR&Date=20031030&ID=3018733http://news.moneycentral.msn.com/breaking/breakingnewsarticle.asp?feed=OBR&Date=20031030&ID=3018733
U.S. Says China Not Manipulating Currency
October 30, 2003 1:32:00 PM ET
By Glenn Somerville and Doug Palmer
WASHINGTON (Reuters) - The Bush administration angered lawmakers on Thursday by giving China and other trading partners a pass on whether they were manipulating currencies to gain an unfair advantage over U.S. manufacturers.
In a keenly awaited report to Congress, the U.S. Treasury said none of its key trading partners -- including China and Japan -- were using untoward currency practices, while still vowing to keep up pressure on China to let market forces set the value for its yuan.
China's tight currency peg to the U.S. dollar has turned into a hot political issue in the United States, where industry groups claim millions of factory jobs have been lost to unfair competition at the same time that the U.S. trade deficit with China has swelled to more than $100 billion last year.
Although lawmakers may have hoped for tougher talk from the Treasury, the report said ``no major trading partner of the United States meets the technical requirements'' for being designated a currency manipulator, which would have required negotiations and potential U.S. trade action.
When Treasury chief John Snow appeared before the Senate Banking Committee to discuss the report, members of the panel immediately attacked it for soft-pedaling.
``The Chinese are cheating,'' said Sen. Jim Bunning, a Kentucky Republican, urging the U.S. to send a strong signal.
KID GLOVES
Sen. Charles Schumer, a New York Democrat who has proposed raising tariffs on Chinese goods if Beijing does not revalue its currency, took a harsher line.
``This report is a whitewash. It treats China with kid gloves when it should be taking off the gloves and confronting China about the fact that it's manipulating the yuan,'' he said.
Snow defended the administration's approach, saying ``financial diplomacy ... is the surest course to get the results we want.''
He said China was committed to moving to a flexible exchange rate, and added he expected to see ``concrete steps'' in the next weeks and months toward that long-term goal.
Senators pressed for swifter action. Many lawmakers argue, as U.S. manufacturers do, that a pegged currency gives China an unfair trade advantage by keeping Chinese goods artificially cheap. Snow said the Treasury was actively urging China to end its decade-old practice of pegging its yuan currency at about 8.28 to the U.S. dollar.
But he resisted the idea of setting a deadline for China because of the effect that would have on currency markets.
``You would set up one-way bets for or against the yuan, which would not be helpful,'' Snow said.
CHINA MUST CHANGE
``This policy is not appropriate for a major economy like China and should be changed,'' said the Treasury report on foreign exchange policy for the first half of 2003.
In his testimony, Snow said the mere existence of a currency peg or of intervention by countries in foreign exchange markets to alter currencies' values was not enough to cause a country to be named a manipulator.
He said the White House ``is aggressively encouraging our major trading partners to adopt policies that promote flexible market-based exchange rates'' and that he had gone to Beijing last month to tell Chinese officials so directly.
Financial market reaction was muted since most traders had expected the Treasury would refrain from finger-pointing.
``They have couched the report in language they have used before; that they have raised issues with Japan and China but they are not accusing them,'' said Larry Brickman, a currency strategist with Banc of America Securities in New York.
The currency report is issued semiannually but seldom creates a ripple since the wording is generally proforma.
Snow said there were ``encouraging'' signs China was taking steps to loosen its regime but said Beijing was reluctant to move too fast lest it put its weak banking system in jeopardy.
Anticipating lawmaker questions on U.S. dollar policy, the Treasury chief repeated that a strong dollar ``is in the U.S. national interest.''
He also said Treasury was ``actively engaged'' with Japan -- which again intervened in foreign exchange markets overnight by selling yen to buy dollars -- on its exchange-rate policies.
The Japanese government spent $59 billion in the first half of 2003, buying dollars to prevent the yen from rising in value and giving Japanese products a pricing edge in foreign markets, the Treasury report said.
© 2003 Reuters
|
|
