U.S. delays decision on branding China's currency policy, skirts confrontation
Sunday, April 4, 2010
The Obama administration postponed a decision Saturday on whether to brand China a currency manipulator, skirting a public confrontation by announcing plans to instead pursue broader discussions about how best to secure a global economic recovery.
With China's leader due in Washington later this month and the heads of both countries trying to smooth over a series of disagreements, Treasury Secretary Timothy F. Geithner said he would delay a world currencies report to Congress due April 15, in deference to "a series of very important, high-level meetings over the next three months."
Geithner's announcement was met with mixed reaction on Capitol Hill, where pressure has been mounting for a confrontation because of concerns that an undervalued Chinese currency is costing American jobs. Sen. Charles E. Schumer (D-N.Y.) said he was "disappointed but not surprised" and that he will push ahead with legislation calling for stricter treatment of currency manipulation.
In a prepared statement, Geithner cited upcoming meetings among officials of the Group of 20 economically influential countries, as well as high-level economic talks between the United States and China. He said those discussions are the proper place to address whether China should allow the value of its currency to rise on world markets.
China has pegged the value of its renminbi, or yuan, to the dollar at a rate that is considered to be undervalued by as much as 40 percent. That makes its goods cheaper on world markets, a fact some economists say has stunted job growth in the United States, prevented Chinese consumers from spending more and harmed other emerging economies whose factories compete against goods produced in China.
Geithner said it was "essential" for China to let the value of its currency float more freely on global exchanges, but he said the upcoming meetings among world financial officials "are the best avenue for advancing U.S. interests at this time."
In recent weeks, Chinese officials have reacted sharply to the suggestion that the United States might cite it for currency manipulation, warning that America would lose in a "trade war" and saying that its currency policy is an internal matter.
The issue became yet another irritant between the two countries, along with disagreements over how to deal with Iran's nuclear program, concern over China's attitude toward climate change discussions, and an increasingly public feud about Chinese policies toward U.S. and other Western companies.
President Obama and Chinese President Hu Jintao spoke by phone for an hour last week in a conversation characterized as an effort to relax some of those tensions. Hu announced he would attend this month's nuclear summit in Washington -- arriving just days before Geithner was to issue the currency report.
The biannual currency report is often uncontroversial. But the upcoming version has become a focal point for members of Congress and business and labor groups who say China's economic policies are siphoning U.S. jobs.
Sen. Charles E. Grassley (Iowa), the ranking Republican on the Senate Finance Committee, said in a statement that he was "disappointed" that the Obama administration had backed down from a confrontation.
"Everyone knows China is manipulating the value of its currency to gain an unfair advantage in international trade," Grassley said. "If we want the Chinese to take us seriously, we need to be willing to say so in public."
Rep. Sander M. Levin (D-Mich.), who opened a Ways and Means Committee hearing last month by estimating that China's currency rules had cost perhaps 1.5 million U.S. jobs, was supportive of Geithner's decision as long as it was "for a definite period and for a defined purpose."
"If the multilateral effort does not result in China's making significant changes, the administration and Congress will have no choice but to take appropriate action," he said.