BEIJING: China yesterday hit back at a bill passed by the US House of Representatives aimed at pressuring Beijing to let its currency rise faster by branding it in violation of world trade rules.
China’s tight leash on the yuan is under intense scrutiny as countries around the world look to export their way back to economic health, raising concerns they will intentionally weaken their currencies to gain an edge.
The bill allows the US Commerce Department to treat “fundamentally undervalued currencies” as an illegal export subsidy so that US companies can request a countervailing duty to offset China’s price advantage.
In response, the official Xinhua news agency quoted China’s commerce ministry spokesman, Yao Jian, as saying: “Starting a countervailing investigation in the name of exchange rates does not conform with relevant WTO (World Trade Organisation) rules.”
The bill would need to be passed by the Senate – far from certain – and signed by President Barack Obama to become law.
The American Chamber of Commerce in China voiced its opposition to the Chinese currency legislation in an email, saying “if enacted into law, the chamber does not believe the bill will be effective in achieving its objectives and would fail to create significant US job growth.”
China’s central bank fixed the yuan’s daily midpoint versus the dollar at a lower level yesterday. Ahead of the US vote, the People’s Bank of China (PBOC) had said China would increase the flexibility of the yuan and improve the way it managed the exchange rate with reference to a basket of currencies of the country’s trading partners. The PBOC issues midpoint data through the Shanghai-based interbank market, the China Foreign Exchange Trade System, on the market’s website, www.chinamoney.com.cn. The yuan may rise or fall 0.5% against the dollar from its midpoint each day.
The bill is likely to fan the flames of a long-running dispute with China over trade and jobs.
It passed with solid bipartisan support just over a month ahead of mid-term elections as voters focus on the stills-truggling US economy and persistently high unemployment.
Many lawmakers both in the House and the Senate have complained for years that China’s policies create an unfair trade advantage, but this is strongest step taken yet. The bill passed by a vote of 348-79.
Any vote in the Senate, however, won’t come until after congressional elections on Nov 2 when the US political landscape could be greatly changed.
“China’s persistent manipulation of its currency contributes to the outsourcing of American jobs and poses a very serious problem that requires real action,” said House Ways and Means Committee chairman Sander Levin.
House Speaker Nancy Pelosi said the bill would give Obama leverage in talks with China.
Before the House vote, China’s central bank reaffirmed its pledge to increase the flexibility of the yuan and improve the way it managed the exchange rate.
Obama and Chinese Premier Wen Jiabao talked about China’s currency and huge trade surplus with the United States on the sidelines of the UN General Assembly last week.
Many lawmakers said the United States was already in a trade war with China and needed new tools to fight it.
Senator Charles Schumer, a Democrat who has been one of the loudest critics in Congress of China’s trade policy, said after the vote that he was ready to take up the cause in the Senate. “We plan to push our bill in the Senate when we return later this year,” he said.
China is the largest foreign buyer of US government debt with holdings of nearly US$847bill as of July. – Reuters
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