China's first reaction to the recent approval by the U.S. House of Representative lawmakers' of a bill designed to pressure it to revalue its currency was somewhat harsh, saying the legislation could damage Sino-U.S. relations. Later, Chinese officials gave a more a muted response to the move, reflecting what many say is Beijing 's interest in minimizing a dispute that could threaten the $300 billion in annual trade flows between the two countries.
The bill, which the House approved before recessing to begin campaigning for the November elections, would allow undervalued currencies to be treated as subsidies, potentially opening the door for trade cases and countervailing duties on the yuan. A Senate version of the legislation is expected to come up for debate in November and the measure still would require presidential approval. Even so, trade experts in China said the willingness of the House to approve the measure could strain relations between the two trade giants.
Asked at a White House press conference Sept. 30 whether President Obama would sign the bill if it were to reach his desk, spokesman Robert Gibbs said he did not know and that there was still another step for the legislation in the Senate.
Gibbs added that the president had expressed concern about the issue, as well as Treasury Secretary Timothy Geithner. "I think lawmakers on Capitol Hill share the same serious concern that the president and Secretary Geithner have," Gibbs said.
In a separate regular news briefing Sept. 30, a spokesperson for the Chinese Ministry of Foreign Affairs said China "rejected" the measure and believes it could damage ties. In longer statements, a Commerce Ministry spokesman was quoted by the official Xinhua news agency as saying the bill violates principles of the World Trade Organization.
The American Chamber of Commerce in China expressed disappointment over the bill's passage, saying the House should instead, "focus on coming up with a response to China 's web of industrial policies, weak intellectual property protection and tightening market access."
"Blaming China won't help the U.S. economy but this legislation may cost American jobs," AmCham-China Chairman John Watkins said in a statement. "We call on the U.S. Senate to thoroughly review the proposed legislation and we hope it does not move forward in the legislative process."
Many analysts discount the possibility of sharp retaliation by China in the short term, especially since the bill hasn't become law and wouldn't immediately produce restrictions on Chinese goods even if it did.
A number of trade lawyers say that if the legislation becomes law, China is very likely to challenge it at the WTO, and could well prevail.
