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US Congress presses China on yuan US rejects China currency charge
(about 3 hours later)
A group of influential US Senators from both major political parties are due to unveil legislation to force China to raise the value of its currency. The US Treasury has refused to describe China as a currency manipulator in its twice-yearly report on exchange rate policies, as political pressures grew.
The move aims to raise the heat on the US government to take a firmer stance on the spiralling US-China trade gap. A group of influential Democrat and Republican Senators now plan to unveil legislation to force China to revalue its currency, threatening tariff hikes.
The lawmakers accuse China of undervaluing the yuan by as much as 40% to give the country an unfair trade advantage at the expense of US firms. The lawmakers say China keeps its yuan much weaker than it should be to boost exports at the expense of US firms.
China warned against fanning the flames of an already tense relationship. But the US government said it could not be sure whether this was the case.
Protectionist pressures In the report, the Bush administration said that China did not meet the technical requirements of a country that is manipulating its currency to gain unfair trade advantages.
It noted the heavy intervention by China's central bank to keep its currency from rising too fast, and the effect this has had on the accumulation of foreign exchange reserves, which now stands at more than $1 trillion (£500bn).
Tougher stance
But, as expected, the Treasury said it was unable to determine that China's exchange rate policy was carried out for the purpose of gaining unfair competitive advantage in international trade.
This has prompted two separate bi-partisan groups of Senators to talk about introducing legislation to enable the US to take a tougher stance on China's currency policy, which US manufactures insist is kept deliberately weak to boost exports and in turn undercuts threatens US jobs
One group, including Senate Finance Committee chairman Max Baucus, was due to release details of a bill designed to "address undervalued currencies that harm US trade and economic interests" on Wednesday.
Any move to politicise the issue will not be conducive to resolving the problem Commerce Ministry spokesman Yao HongshenAny move to politicise the issue will not be conducive to resolving the problem Commerce Ministry spokesman Yao Hongshen
Later on Wednesday, a bipartisan group of US Senators, including Senate Finance Committee chairman Max Baucus, will release details of a bill designed to "address undervalued currencies that harm US trade and economic interests".
"Fundamentally misaligned currencies distort global markets and put US manufacturers and farmers at a competitive disadvantage," said the statement by the group, which also includes Senator Grassley, the ranking Republican on the Finance Committee, which oversees trade policy."Fundamentally misaligned currencies distort global markets and put US manufacturers and farmers at a competitive disadvantage," said the statement by the group, which also includes Senator Grassley, the ranking Republican on the Finance Committee, which oversees trade policy.
The attempt to legislate on China's currency policy - which US manufactures insist is kept deliberately weak to boost exports and in turn undercuts threatens US jobs - comes on the same day as the US Treasury releases its twice-yearly report on exchange rate policies to Congress. Another group of Senators is planning to give new powers to the Treasury to challenge China's currency practice.
US lawmakers have urged the Treasury to call China a currency manipulator in its report - an aggressive label that they believe could speed up progress on liberalising the Chinese currency.
And another group of Senators is planning to give new powers to the Treasury to challenge China's currency practice.
Floating yuanFloating yuan
The US Treasury has been coaxing China to move to a more flexible market-orientated exchange rate policy for the past two years since China relaxed its fixed exchange-rate policy which linked the yuan to the US dollar.The US Treasury has been coaxing China to move to a more flexible market-orientated exchange rate policy for the past two years since China relaxed its fixed exchange-rate policy which linked the yuan to the US dollar.
Since then, it has floated against a basket of currencies, including the dollar.Since then, it has floated against a basket of currencies, including the dollar.
Treasury Secretary Henry Paulson says the best way to get China to move faster was "through direct discussions and negotiation, not through legislation."Treasury Secretary Henry Paulson says the best way to get China to move faster was "through direct discussions and negotiation, not through legislation."
Over the past 12 months the yuan has appreciated just 4.8% against the dollar, while the British pound has appreciated 7.1% against the greenback over the same period.Over the past 12 months the yuan has appreciated just 4.8% against the dollar, while the British pound has appreciated 7.1% against the greenback over the same period.
China recently announced that its trade surplus had increased by 73% to $22.5bn (£11.4bn) in May.China recently announced that its trade surplus had increased by 73% to $22.5bn (£11.4bn) in May.
Chinese officials hit back at threats to introduce a bill that could slap punitive tariffs on Chinese imports.Chinese officials hit back at threats to introduce a bill that could slap punitive tariffs on Chinese imports.
"Any move to politicise the issue will not be conducive to resolving the problem," said Commerce Ministry spokesman Yao Hongshen."Any move to politicise the issue will not be conducive to resolving the problem," said Commerce Ministry spokesman Yao Hongshen.