Posted by: mulrickillion | November 2, 2011

Treasury Delays Report on China’s Currency

Hong Kong Trader, 28 Oct 2011 —

The Treasury Department has again delayed the publication of its semi-annual report to Congress on international economic and exchange rate policies in light of several high-level international meetings scheduled to take place in October and November, including the 14-15 October G-20 finance ministers and central bank governors meeting, the 3-4 November G-20 leaders summit, the 10 November Asia-Pacific Economic Cooperation finance ministers meeting and the 12-13November APEC leaders meeting. Among other things, the report on international economic and exchange rate policies announces whether Treasury has determined that any major U.S. trading partner is manipulating the value of its currency to gain a trade advantage. The most recent reports, issued on 4 February and 27 May 2011, did not name any currency manipulators. The 27 May report concluded that the yuan remained undervalued but highlighted the on-going appreciation of the Chinese currency and China’s public statements asserting that it would continue to promote exchange rate flexibility and address existing external economic imbalances.

Since June 2010, when mainland Chinese authorities decided to once again allow the exchange rate to appreciate in response to market forces, the yuan has appreciated by approximately 6.6 percent against the U.S. dollar. The yuan has slowly but gradually continued to increase its value in recent months and stood at ¥6.3827 per U.S. dollar as of 21 November, 1.5 percentage points higher than at the end of May. However, this steady progress has not assuaged longstanding congressional concerns, with the House and Senate approving legislation over the past 18 months to put additional pressure on Beijing to revalue its currency. The House approved its bill during the previous session of Congress when Democrats controlled that body, but that bill expired after the new session of Congress began on 3 January 2011. The Democrat-controlled Senate approved its own version of a China currency bill on 11 October but the House, currently in Republican hands, has resisted calls to follow suit. Republican leaders remain opposed to the currency legislation but Democratic supporters are trying to garner the support of rank-and-file Republicans who backed previous efforts on this issue.

The Obama administration has signalled time and again that it prefers to deal with the currency issue through bi-lateral engagement and dialogue with Beijing, although Treasury Secretary Tim Geithner said recently that the administration is “open to any tool, any piece of legislation, that gives us more leverage that could be effective in helping advance our interests.” – Treasury Delays Report on China’s Currency


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