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  • “China Asks US Groups to Back Currency Stance,” Financial Times

    Posted on March 16th, 2010 admin No comments

    China asks US groups to back currency stance

    By Geoff Dyer and Jamil Anderlini in Beijing and James Politi in Washington

    Published: March 16 2010 08:17 | Last updated: March 16 2010 19:20

    China urged US multinationals to lobby the Obama administration against taking protectionist measures over the renminbi, just as attitudes towards Beijing appear to be hardening in the US Congress.

    Yao Jian, a spokesman at the Chinese commerce ministry, said some companies had already been lobbying against restrictions on imports to the US.

    “We hope that US companies in China will express their demands and point of views in the US, in order to promote the development of global trade and jointly oppose trade protectionism,” he said.

    The comments came as the political heat surrounding China’s currency policy intensified in Washington. Led by Chuck Schumer, the New York Democrat, and Lindsey Graham, the South Carolina Republican, a group of senators said China’s refusal to let its currency appreciate was damaging the US economic recovery and hurting American competitiveness.

    “China’s currency manipulation, would be unacceptable even in good economic times. At a time of 10 per cent unemployment, we will simply not stand for it,” Mr Schumer said. The senators have proposed a bill that would require the Treasury to identify countries with “fundamentally misaligned currencies” as well as those that need to be tackled with “priority action”.

    Those countries would have nearly a year to adjust the value of their currency before the US administration was required to bring a case against them at the World Trade Organisation, according to the proposal. The Treasury would also have to “consult” with the Federal Reserve and other central banks about “remedial intervention in currency markets”.

    Some measures could be taken earlier, including forbidding Chinese companies from participating in US government contracts, requesting an International Monetary Fund consultation with China and including currency undervaluation as part of dumping calculations – a move that could result in tariffs on Chinese imports. Mr Schumer and Mr Graham have been leading the charge in Congress against China’s currency policy for years and have periodically presented similar proposals.

    But their efforts might have gained fresh impetus after a flare-up in tensions between Beijing and Washington on issues including currency.

    Wen Jiabao, Chinese premier, warned on Sunday that pressing China on currency policy amounted to protectionism and insisted that the renminbi was not undervalued.

    “That was the last straw,” said Mr Schumer, who complained that the US had been “lectured”. “We are fed up, and we are not going to take it any more.”

    On April 15, the Treasury will release its latest semi-annual currency report, and pressure is building on the administration formally to describe China as a “manipulator” – a move that it has resisted until now even though Barack Obama, president, was sharply critical of its currency regime during the 2008 election campaign.

    A Treasury official said it was reviewing the Schumer-Graham proposal. “We too have serious concerns about China’s exchange rate policy,” the official said, adding that China should “resume” appreciation on the back of the economic rebound. “A more market-oriented Chinese exchange rate will make an essential contribution to a stronger, more balanced global economy that is essential to ensure a durable recovery for American businesses and workers,” the official said.

    US multinationals operating in China have long been opposed to Washington taking action over the perceived undervaluation of the Chinese currency. Some business leaders have already spoken out.

    “A 10-15 per cent appreciation of the renminbi would have a very modest effect on the margins of the US current account deficit,” Robert Pozen, chairman of MFS Investment Management and a senior lecturer at the Harvard Business School, told the Financial Times. “The US needs to stay quiet. Hopefully it won’t name China a currency manipulator.”

    The current dispute comes at a time when foreign companies in China are becoming increasingly critical of the restrictions being placed on their businesses. Indeed, some executives have warned that Beijing could start to lose the political support it has received in the past from multinationals.

    The American Chamber of Commerce in China, which has tended to avoid open criticism of Beijing in the past, is scheduled to release a survey on Monday showing deep dissatisfaction among member companies with China’s new “indigenous innovation” regulations, which are seen by many as thinly veiled protectionism.

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