Disappointment with Treasury Decision not to Cite China on Currency Manipulation

Posted by scapozzola on 11/29/2012

Earlier this week, the U.S. Treasury Department declined to cite China as a currency manipulator in its latest semi-annual report to Congress.

Alliance for American Manufacturing (AAM) Executive Director Scott Paul expressed the disappointment of many domestic manufacturing advocates in a short statement, saying that "the Treasury Department has once again declined to designate China as a currency manipulator, which it most certainly is."

Paul said the alternative to such "inaction" would be for Congress to pass a popular, bipartisan bill that would deter China and other nations from manipulating their currencies.

In an August 2012 report, Robert Scott of the Economic Policy Institute (EPI) found that the Chinese Yuan is still undervalued by roughly one-third.  (See page 9 of his "China Toll" study.)

Reaction to the Treasury Department decision was immediate.  UPI's Anthony Hall offered a somewhat sarcastic analysis:

...the department said the yuan was "significantly undervalued." But, hey, that doesn't make China a currency manipulator, the department said. At least, that does not make it a currency manipulator to the point that it needs to have a scarlet CM sewn onto its outer-garment.

Associated Press correspondent Martin Crutsinger quoted the reaction of Sen. Charles Schumer (D-NY):

"This report all but admits China's currency is being manipulated but stops short of saying so explicitly," Schumer, D-N.Y., said in a statement. "It's time for the Obama administration to rip off the Band-aid and force China to play by the same rules as all other nations."

Treasury said the yuan, also known as the renminbi, has risen in valued by 9.7 percent since June 2010 — and by 12.6 percent when inflation is taken into account.

Still, Treasury said the yuan remains significantly undervalued. It vowed to keep pressing Beijing to let the currency rise further to "level the playing field for American workers and businesses and support a strong, sustainable and balanced global economy."

As AAM's Scott Paul observed, action must now move to Congress.  But any Congressional effort remains unclear.

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