China adamantly opposes US yuan bill
Updated: 2011-10-12 11:30
WASHINGTON / BEIJING - - China's Ministry of Commerce on Wednesday expressed its adamant opposition to a vote by the US Senate that passed a bill to press China to let its currency rise further.
The move has seriously violated international regulations and sent a wrong signal of escalating trade protectionism, the ministry said.
By a vote of 63-35, the US Senate Tuesday passed the Currency Exchange Rate Oversight Act, which will allow sanctions against China if the US Treasury Department finds China is undervaluing its currency.
Supporters of the measure, who blame China's yuan for hurting the US economy, say the legislation would create jobs. But China, several US business groups and the House of Representatives say the bill will lead to a trade war between the two nations.
The thorny bill is now in the hands of the White House and House Republican leaders. According to CNN, citing Speaker John Boehner, the Republican-controlled House won't take up the bill. Boehner has called the bill "dangerous".
For the bill to become law, it would need to pass both the Senate and the House and then be signed by the president.
US President Barack Obama warned last week he didn't want to pass "symbolic" laws that would eventually be turned down by the World Trade Organization. Though the Obama administration has been pushing China to appreciate its currency, it has not labeled China a currency manipulator.
For years, US officials have pressured China to quickly appreciate its yuan.
Many US officials and economists say Beijing is undervaluing its currency by 20-30 percent in order to promote exports. Faced with high unemployment rates all over the country, US politicians say China is stealing jobs away from American soil through its low-cost products.
Beijing, however, said it is committed to gradually reforming the yuan's value, which has risen 30 percent against the US dollar since 2005. Over the past year, the yuan has appreciated 5.2 percent against the US dollar.
The Senate passage of the currency bill indicates the political pressure to "get tough" on Chinese trade practices, said Philip Levy, economist with the American Enterprise Institute, a public policy think tank.
"So far, the Republican leadership in the House of Representatives has indicated that it does not consider such an approach to be useful. President Obama has indicated some concerns, but has not yet put out a veto threat," he said.
China's Deputy Foreign Minister Cui Tiankai on Monday reiterated Beijing's opposition to the bill, saying it is a "lose-lose" situation.
Experts say it is highly unlikely that the bill will be approved by the Republican-controlled House and the Obama administration, who are both unwilling to put bilateral relations in harm's way.
"If it becomes a law, it will definitely sink the bilateral relationship between the two countries. And it will not only hamper the US economic recovery, but also make a trade war inevitable," said He Maochun, director of the Economy and Diplomacy Research Center at Tsinghua University in Beijing.
Zhao Xijun, deputy director of the Financial and Securities Institute at Renmin University of China, said that sharp currency fluctuations should be avoided, noting that a fast-appreciating yuan would not resolve the current trade problems between China and the US.
"The US' huge trade deficit is mainly due to the structural problems of its own economy and Washington's tight control over some exports," Zhao said.
In her op-ed in Foreign Policy published Tuesday, Secretary of State Hillary Clinton called for economic cooperation with China and urged China to more rapidly appreciate its currency.
"And we look to China to take steps to allow its currency to appreciate more rapidly, both against the dollar and against the currencies of its other major trading partners. Such reforms, we believe, would not only benefit both our countries (indeed, they would support the goals of China's own five-year plan, which calls for more domestic-led growth), but also contribute to global economic balance, predictability, and broader prosperity," she wrote.
The US accusations have been aired at a time when American citizens are becoming increasingly frustrated with the weak domestic economy and high unemployment rates ahead of the presidential elections in November next year.