WASHINGTON — After a conciliatory tone struck by President Obama, U.S. senators are pressing the administration to take a more aggressive stance on currency reform in China.
This story first appeared in the November 24, 2009 issue of WWD. Subscribe Today.
Obama’s meeting in Beijing this month with Chinese President Hu Jintao produced no new agreements and led to a fresh round of criticism in Congress. In addition, the Treasury Department has failed to cite China as a currency manipulator in two semiannual reports this year, although Obama pledged during the campaign to crack down on China’s currency.
Opponents argue that China deliberately manipulates its currency, the yuan, by pegging it to the dollar instead of letting it float freely on the market in order to gain a trade advantage with cheaper exports, putting U.S. manufacturers at a competitive disadvantage. Lawmakers have introduced several bills, all of which have stalled, levying varying degrees of penalties against China for undervaluing the currency.
At a pair of congressional hearings last week, Republican and Democratic senators pushed Treasury Secretary Timothy Geithner and three Treasury Department nominees to take stronger action against China to force the value of its currency to appreciate.
Sen. Chuck Grassley (R., Iowa), the ranking Republican on the Senate Finance Committee, said he was “frustrated” by the inaction.
“China is manipulating its currency to obtain an export advantage,” he said. “We should state that.”
Sen. Kent Conrad (D., N.D.) said, “It’s about as clear as it can be. They are manipulating their currency to confer an advantage for their economy…and it is an absolute obligation [on the part of the U.S.] to press back.”
Charles Collyns, Obama’s nominee for deputy under secretary of Treasury, said he reviewed the agency’s reports and found that China “does not meet the standard set in the [current statute] to justify labeling it a currency manipulator.”
“However, the report clearly identified issues with China managing its exchange rate,” Collyns said. “The renminbi [yuan] is clearly undervalued,” he said, adding the administration “needs to find effective ways to persuade the Chinese to modify their policies.”
This followed high-profile chastising of Geithner by senators at a Joint Economic Committee hearing.
Sen. Charles Schumer (D., N.Y.) said he found Obama’s meeting with Chinese leaders “terribly disappointing” and grilled Geithner on the currency issue.
Schumer said he planned to renew efforts to “do some things legislatively” to prod China into quicker action, but did not offer specifics.
Geithner said: “We have a strong obligation to making sure we’re aggressive in pursuing our interests as a country and our economic interests in trying to make sure that we see in our major trading partners policies that are going to open their markets further.”
Geithner expressed confidence that China will change its policy and move to a more flexible exchange rate, but he did not provide a time frame.