WASHINGTON — Federal Reserve Board chairman Alan Greenspan and Treasury Secretary John Snow told two senators on Thursday that pressures in China have increased the likelihood its currency policies will be adjusted within months.
Sens. Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.) said at a news conference that Greenspan and Snow persuaded them to delay a vote on a bill they introduced that would impose a 27.5 percent tariff on all imports from China. The duty is intended to compensate for the subsidy Chinese exporters get because the country’s currency, the yuan, is considered undervalued.
China has kept an exchange rate of 8.28 yuan to a dollar for a decade, creating what is in many lawmakers’ views an unfair advantage for Chinese firms by lowering export prices by as much as 40 percent.
“They have convinced us that the likelihood of real progress with China on currency revaluation is very real,” Schumer said after the meeting in the Capitol. “There have been real signs of both sides coming together, our country and the Chinese, to try and come to some agreement and some accommodation and that those discussions will produce real fruit within the next several months.”
Schumer added, “What we’ve been told is that there are major forces in Chinese society and in the economy that realize that the polices that they have had in terms of currency don’t work for China, don’t work for the U.S. and don’t work for the whole economy.”
He cautioned there was no certainty that any action would be taken by China. The senators also asked Snow to arrange a meeting with Chinese leaders so the senators can discuss the issue with them.
“This is a big deal if you’re in a manufacturing enterprise and competing on the global stage,” Graham said. “A revaluation of the Chinese currency will help our manufacturing community if it’s significant and if it will continue toward a float.”
A Treasury spokesman said, “China has definitely been making reforms to their banking system, to their policy on capital controls.”
This story first appeared in the July 1, 2005 issue of WWD. Subscribe Today.