The Treasury Department has finally sent Congress a much-anticipated report on countries that Treasury considers "currency manipulators." No nation made the list.
The report, which had been expected three months ago, indicated that Treasury agrees with assessments that China's currency, the yuan or renminbi, has been undervalued, but also pointed optimistically to China's announcement last month that it would ease a two-year de facto currency peg to the U.S. dollar. Critics, both in Congress and in some U.S. business circles, charge that the undervalued yuan provides Chinese exporters unfair trade advantages.
Despite the charges against China , though, none of the Treasury reports issued during the period in which the renminbi was fixed to the dollar cited China for currency manipulation. Nevertheless, the latest Treasury report indicated the administration's agreement that the renminbi has been undervalued. It called China 's return to a more flexible, market-based currency policy a welcome first step, but also said more is expected.
"What matters is how far and how fast the renminbi appreciates," said a statement from Treasury Secretary Timothy Geithner, which added that the administration would work toward expanded U.S. export opportunities in China .
Analysts note that On June 21, the first trading day following China 's policy announcement, the yuan appreciated 0.43 percent, the largest single day appreciation against the dollar since China 's initial 2.1 percent revaluation on July 21, 2005 . Between the June 19 announcement and July 2, the yuan appreciated a total of 0.81 percent compared to the dollar.
This level of appreciation against the dollar has done virtually nothing to mute criticism of both China 's currency policy and the Obama administration's response. Critics argue the currency makes U.S. exports more expensive and Chinese imports cheaper, contributing to the U.S. trade deficit and eliminating U.S. jobs.
"This report is as disappointing as it is unsurprising," Sen. Chuck Schumer (D-N.Y.) said in a statement. "It's clear it will take an act of Congress to do the obvious and call China out for its currency manipulation."
Schumer and Sen. Lindsey Graham (R-S.C.) have introduced legislation (S 3134) that would force a more market-oriented value for the Chinese currency by making it easier for Treasury to cite the Chinese by finding currency misalignment rather than manipulation.
The report noted that U.S. exports to China have rebounded to 20 percent more than their level before the financial crisis and recession hit, a quicker bounce back than overall U.S. exports. In addition, it said the U.S. current account deficit is at its lowest level in more than 10 years.
But the report also indicated that China 's trade surplus is likely to rise again as the rest of the world recovers. Global economic growth is expected to reach 4.6 percent over the course of this year, according to a recent analysis by the International Monetary Fund. The report can be accessed on the Web at this site.
