U.S. Pressure
The U.S. raised the pressure on China last week, with Treasury Undersecretary
for International Affairs Tim Adams saying the Chinese government has been "far
too cautious" on currency policy and should switch to a more flexible system
now.
With congressional elections in November, the U.S. has taken the lead in
calling for a currency revaluation in China, which has leapfrogged the U.K. to
become the world's fourth- largest economy. Steps so far have "not satisfied the
demand of U.S. policy makers," said the commission document.
U.S. Senators Charles Schumer and Lindsey Graham are calling for 27.5 percent
tariffs on Chinese imports, though last week they delayed a vote on the proposal
until September. Some U.S. analysts predict legislation punishing China for the
undervalued currency will pass before the November election.
"There has been more aggressive rhetoric from the U.S., but rhetoric is not
going to make the Chinese move faster," said Marios Maratheftis, a currency
strategist in London at Standard Chartered Plc, a bank that makes about
two-thirds of its profit in Asia. "They're on the correct path with a gradual
strengthening of the yuan. Gradual is the key word."
Currency Manipulation
Separately, the U.S. Treasury is considering whether to brand China a
currency manipulator for the first time in more than a decade. That ruling may
be delayed until after Chinese President Hu Jintao's April 20 visit to
Washington, Adams said last week.
The yuan declined to 8.0199 against the dollar Monday in Shanghai, from
8.0172 on March 31, according to data Bloomberg compiled.
European governments have sought to whittle away at China's trade advantages
by imposing tariffs or filing complaints at the World Trade Organization. Last
month the EU slapped duties on some Chinese leather shoes, following last year's
decision to set limits on Chinese clothing imports.
Pushed by French President Jacques Chirac, EU leaders last year considered
dropping a ban on arms sales to China. Pressure from the U.S. and a change in
government in Germany led the EU to keep the ban in place.
In a rare joint move, the U.S. and EU last month threatened to take China to
the WTO for setting tariffs on car parts that raise costs for foreign auto
factories in China.