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China pressured to fix undervalued yuan, seen as U.S. recovery threat

WASHINGTON — The Obama administration increased its criticisms of China's economic policies Thursday, as Treasury Secretary Timothy Geithner told Congress that China had substantially undervalued its currency to gain an unfair trade advantage, tolerated theft of foreign technology and created unreasonable barriers to U.S. imports.

But the election-year anger from lawmakers seemed to surpass even Geithner's tougher posture. Lawmakers expressed impatience with the administration's familiar reliance on persuasion and negotiation, saying such tactics had yielded little.

In Beijing, a spokeswoman for the Foreign Ministry said that China would not respond to pressure and that a revaluation of the currency, the yuan, would do little to affect the U.S. trade deficit with China.

Dismay over China's currency interventions — it buys about $1 billion a day to maintain the yuan's peg to the dollar — has been a recurring theme for years. But now, with the United States in a stalled economic recovery and lawmakers facing a restive electorate, the administration is clearly looking for alternative ways to bring pressure on the Chinese.

Geithner urged China to allow "significant, sustained appreciation" of its undervalued currency and even suggested that anything less would strain the relations of the world's two largest economies. He made it clear that President Barack Obama would press the issue with China's leaders, giving rise to a potentially pivotal moment in November when leaders of the Group of 20 economic powers meet in South Korea.

Still, Geithner's plan did not appear to mollify lawmakers.

"There is no question that the economic and trade policies of China represent clear roadblocks to our recovery," Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, told Geithner at a hearing. "I've listened to every administration, Democrats and Republicans, from Ronald Reagan to the current administration, say virtually the same thing, producing the same results. China does basically whatever it wants, while we grow weaker and they grow stronger."

Successive administrations have declined to formally designate China a currency manipulator — a finding that could initiate U.S. retaliatory measures — something that has frustrated lawmakers.

U.S. business interests are sharply divided on the currency issue. Domestic manufacturers and labor unions say China's currency policies have eviscerated industrial employment. But large multinational companies, particularly those with extensive production facilities in China, benefit from a weak yuan just as Chinese manufacturers do.

Those companies, along with Wall Street firms, are fearful — as Geithner acknowledged — that excessive pressure could lead China to retaliate against their operations in China.

The secretary attacked what he called rampant violations of intellectual property rights and an unacceptable level of theft of technology.

He also criticized a proposal by China to require that certain products be accredited before being sold to its government.

Geithner pledged that the administration would be "aggressively using the full set of trade remedies available to us," including filing new cases with the World Trade Organization. The U.S. trade representative's office filed two such cases Wednesday.

China pressured to fix undervalued yuan, seen as U.S. recovery threat 09/16/10 [Last modified: Thursday, September 16, 2010 10:36pm]
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