adar12000
03-23-2006, 04:21 PM
1. U.S. to Force Chinese Currency Revaluation?
Two U.S. senators have traveled to China to urge that country's leaders to loosen currency controls and revalue the nation's yuan currency, allowing it to rise significantly against the dollar.
Charles Schumer (D-NY) and Lindsey Graham (R-S.C.) have been among the most vocal of U.S. government officials in claiming that China's currency policy is a blatant means of keeping the yuan artificially cheap to provide an advantage for Chinese exports.
China "is on track to amass more than $1 trillion in foreign-currency reserves by year-end - glaring evidence of its intervention in the currency markets. And its huge trade surplus ... more than tripled last year to $100 billion," according to Forbes.
Schumer and Graham have written a bill that would effectively allow the United States to impose a 27.5% tax on all Chinese exports to America - unless the Asian nation agrees to let its currency rise considerably against the dollar.
"We believe that there is a very real possibility that the Chinese government and the Chinese people see it in their interest to let the yuan float," Schumer said at a briefing during his visit.
"We still need some concrete signs of movement," he said. "It doesn't have to be the way that we propose - we've always said that. But we need to know over a discrete and reasonable period of time that the goal of having the Chinese currency float and market forces control it ... should occur."
Interestingly, on Tuesday the yuan hit its highest level since July (when China rid itself of its peg to the dollar) - just in time for the arrival of Schumer and Graham, according to Forbes.
"If China, which manages the yuan against an unknown basket of currencies, thinks it can fob off its critics this way, it has mightily underestimated Congress in an election year," says Forbes.
"To judge by the host of bills and amendments aimed at curbing trade with China that are floating around Capitol Hill, there is a hearty appetite for China-bashing in Congress."
In fact, there is talk that unless China moves to fix the situation, the U.S. Treasury may soon brand the country a "currency manipulator."
The Forbes article claims that China has ignored America's requests because it may have believed that the Bush administration would override any attempts by Congress to force China's hand.
But the Chinese may have underestimated the current extent of Bush's power, which has seemingly dwindled as Congress becomes much more willing to override his decisions - especially in an election year, says Forbes.
"What the Chinese fail to grasp is that Congress could pass a protectionist bill that is veto-proof," Desmond Lachman, an economist at the American Enterprise Institute in Washington, D.C., tells the magazine.
Under the current system, China's central bank is only able to raise the currency by 0.3% per day. But "Schumer and Graham contend the yuan is undervalued by 15 to 40%, bloating the U.S. trade deficit with China, which the United States says stood at about $202 billion last year," according to Reuters.
Two U.S. senators have traveled to China to urge that country's leaders to loosen currency controls and revalue the nation's yuan currency, allowing it to rise significantly against the dollar.
Charles Schumer (D-NY) and Lindsey Graham (R-S.C.) have been among the most vocal of U.S. government officials in claiming that China's currency policy is a blatant means of keeping the yuan artificially cheap to provide an advantage for Chinese exports.
China "is on track to amass more than $1 trillion in foreign-currency reserves by year-end - glaring evidence of its intervention in the currency markets. And its huge trade surplus ... more than tripled last year to $100 billion," according to Forbes.
Schumer and Graham have written a bill that would effectively allow the United States to impose a 27.5% tax on all Chinese exports to America - unless the Asian nation agrees to let its currency rise considerably against the dollar.
"We believe that there is a very real possibility that the Chinese government and the Chinese people see it in their interest to let the yuan float," Schumer said at a briefing during his visit.
"We still need some concrete signs of movement," he said. "It doesn't have to be the way that we propose - we've always said that. But we need to know over a discrete and reasonable period of time that the goal of having the Chinese currency float and market forces control it ... should occur."
Interestingly, on Tuesday the yuan hit its highest level since July (when China rid itself of its peg to the dollar) - just in time for the arrival of Schumer and Graham, according to Forbes.
"If China, which manages the yuan against an unknown basket of currencies, thinks it can fob off its critics this way, it has mightily underestimated Congress in an election year," says Forbes.
"To judge by the host of bills and amendments aimed at curbing trade with China that are floating around Capitol Hill, there is a hearty appetite for China-bashing in Congress."
In fact, there is talk that unless China moves to fix the situation, the U.S. Treasury may soon brand the country a "currency manipulator."
The Forbes article claims that China has ignored America's requests because it may have believed that the Bush administration would override any attempts by Congress to force China's hand.
But the Chinese may have underestimated the current extent of Bush's power, which has seemingly dwindled as Congress becomes much more willing to override his decisions - especially in an election year, says Forbes.
"What the Chinese fail to grasp is that Congress could pass a protectionist bill that is veto-proof," Desmond Lachman, an economist at the American Enterprise Institute in Washington, D.C., tells the magazine.
Under the current system, China's central bank is only able to raise the currency by 0.3% per day. But "Schumer and Graham contend the yuan is undervalued by 15 to 40%, bloating the U.S. trade deficit with China, which the United States says stood at about $202 billion last year," according to Reuters.