Once again the Obama administration refuses to label China a currency manipulator. This is when the U.S.-China trade deficit looks on target to hit $300 billion and China just slapped the United States with a unjustified 22% additional tariff on American SUVs.
The Report highlights the need for greater exchange rate flexibility, most notably by China, but also in other major economies. Based on the ongoing appreciation of the RMB against the dollar since June 2010, the decline in China's current account surplus, and China's official commitments at the G-20, APEC, and the U.S.-China Strategic and Economic Dialogue (S&ED) that it will move more rapidly toward exchange rate flexibility, Treasury has concluded that the standards identified in Section 3004 of the Act during the period covered in this Report have not been met with respect to China. Nonetheless, the movement of the RMB to date is insufficient. Treasury will closely monitor the pace of RMB appreciation and press for policy changes that yield greater exchange rate flexibility, a level playing field, and a sustained shift to domestic demand-led growth.
You think the United States government produces imaginary numbers for economic reports? Try China. Consider the heat on the U.S. trade deficit, jobs, currency manipulation and China. Now we have a trade report from China claiming their surplus was cut almost in half in a month.
World Trade Organization judges rejected China’s complaint that U.S. tariffs on Chinese car and light-truck tires violate global trade rules, saying the Obama administration “did not fail to comply with its obligations.”
President Barack Obama announced the three-year duties on $1.8 billion of tires from China in September 2009, acting on a complaint by the United Steelworkers union, which represents 15,000 employees at 13 tire plants in the U.S. The union said Chinese tire exports to the U.S. tripled from 2001 to 2004 to 41 million and called for a cap on annual imports of 21 million.
China screamed protectionist, which the WTO rejected. The tariff schedule for Chinese tires was 1st year: 35%, 2nd: 30%, then 25%. This is a huge deal, a major victory because the WTO allowed tariffs as a trade remedy. It's also important that just because someone name calls something protectionist, does not make it illegal under the WTO.
Meanwhile Indian imported steel pipe is being dug up because it's defective and Senators Sherrod Brown and Olympia Snowe have introduced an amendment to put tariffs on China for currency manipulation.
This report is as disappointing as it is unsurprising. It's clear it will take an act of Congress to do the obvious and call China out for its currency manipulation.
"Claiming China doesn't manipulate its currency makes about as much sense as saying LeBron James doesn't play basketball.
"It's clear that China's announcement before the G-20 last month was nothing more than a charade, but the Administration seems to have fallen for this rather unbelievable promise.
"Congress must pass strong legislation to address China's currency manipulation so that America's workers and businesses can compete on a level playing field.
"We will never double exports unless we stop China's cheating.
"This is a step backward."
Don't think it's just Democrats blasting the administration for refusing to confront China, Republicans are as well.
Right. The specifics are clearly lacking and worse, China rejects a one time re-evaluation.
The decision to “increase the renminbi’s exchange-rate flexibility” was made after the economy improved, the central bank said in a statement on its website, without indicating a time-frame for the change. It ruled out a one-off revaluation, saying there is no basis for “large-scale appreciation,” and kept the yuan’s 0.5 percent daily trading band unchanged.
“The recovery and upturn of the Chinese economy has become more solid with the enhanced economic stability,” the People’s Bank of China said in the statement. “It is desirable to proceed further with reform of the renminbi exchange-rate regime and increase the renminbi exchange-rate flexibility.”
The Renminbi is considered undervalued from 23% to 40%. This appears to be a non-announcement announcement from China before the G-20 meeting in order to get the pressure off for China's currency manipulation.
Just yesterday China claimed their currency manipulation was not up for discussion at the G-20 meeting.
The actual announcement is here. China claims their currency peg helped with the financial crisis. Uh huh. From the press release:
There is a Strategic and Economic Dialogue between the United States and China in Beijing starting Monday. So far we have seen the United States wimp out on truly confronting China on currency manipulation. Both Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner are attending.
U.S. and Chinese officials have stressed that the meeting in Beijing will not be dominated by the yuan.
There are some rumblings by Clinton on the economy:
"In the coming days, officials at the highest levels of our two governments will be discussing issues of economic balance and competition," Clinton said in a speech given in a vast hangar at Shanghai airport, referring to the Beijing meeting.
"Transparency in rule making and standard setting, non-discrimination, fair access to sales to private sector and government purchasers alike, the strong enforcement of intellectual property rights are all vitally important in the 21st century global economy," Clinton told the audience of U.S. and Chinese business executives.
"American companies want to compete in China," she said, standing in front of a Boeing 737. "They want to sell goods made by American workers to Chinese consumers with rising income and increasing demand."
Currencies of a number of emerging Asian economies remain undervalued, substantially in the case of the renminbi,” the IMF said in the report. Renminbi is a name for China’s currency, a denomination of which is the yuan. It’s essential for China to address excess demand pressures by reining in credit growth and allowing exchange-rate appreciation - IMF
What a surprise. Here comes the ineffectual response on Chinese currency manipulation so the U.S. can pass the buck again.
The Chinese government is preparing to announce in coming days that it will allow its currency to strengthen slightly and vary more from day to day, a move being taken for domestic policy reasons in China but likely to please the Obama administration, people with knowledge of the emerging consensus in Beijing said on Thursday.
The article goes on to claim this is a political windfall for the Obama administration.
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