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U.S. Doesn't Cite China For Currency Policy

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By MARTIN CRUTSINGER, The Associated Press

Published: December 20, 2007

WASHINGTON - The United States declined on Wednesday to cite China for manipulating its currency for unfair trade advantages.

That finding came despite pressure in Congress for penalties because of the growing U.S. trade deficit with China. The trade gap is expected to hit an all-time high above $250 billion this year. The imbalance has been blamed as contributing to the loss of 3 million manufacturing jobs in the United States since 2000.

The Bush administration told Congress the recent "moderate acceleration" in the rise of the value of China's currency, the yuan, versus the dollar was welcome but "still insufficient." The administration's report, required twice a year, said China did not meet the requirements in U.S. law to be designated a currency manipulator.

The Treasury Department said the yuan's recent movement was "too limited and modest" to make a significant contribution to the problems facing the global economy from an undervalued currency. They include the huge trade imbalance with the United States and other nations and inflationary troubles in China.

The report said China should "significantly accelerate" the yuan's appreciation to "minimize the risks that are being created for China itself as well as the world economy."

The report noted that Treasury Secretary Henry Paulson has enlisted the support of other leading industrial countries to urge China to move more quickly and allow its currency to rise in value.
American manufacturers contend that the yuan is undervalued by as much as 40 percent against the dollar, making Chinese products cheaper in this country and U.S. goods costlier in China.

China modified its currency system in July 2005. Since then, the yuan has risen in value by 12.1 percent. But that is far less than what U.S. manufacturers say is needed to address the trade gap.

Critics calling for a tougher approach in dealings with China expressed disappointment in the decision.

Frank Vargo, the vice president for international affairs at the National Association of Manufacturers, said the administration's failure to act would increase pressure in Congress to pass legislation that would allow the United States to penalize China for its currency policies.

"The fact that next year is an election year increases the likelihood for legislation," he said. Vargo said a designation by the United States that China is manipulating its currency is necessary for the International Monetary Fund to press China to move faster in allowing its currency to appreciate.

The U.S. deficit with China was $233 billion last year, America's largest ever with a single country. It is on track to surpass that amount even though some Chinese products such as tires and toys have been the subject of high-profile recalls.

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