Treasury declines to name China a currency manipulator

In a report to Congress, Treasury signaled that the decision was based on China’s move last year to be more flexible with the exchange rate and because the country had committed, in President Hu Jintao’s recent visit to the United States, to continue to promote exchange rate reform. 

“Treasury’s view, however, is that progress thus far is insufficient and that more progress is needed,” said the report, which was originally expected to be delivered in October. 

The department’s decision comes after pressure from Congress to label China a currency manipulator — with some lawmakers declaring that China has kept the renminbi artificially low, hurting American exporters. The report also comes not long after Treasury Secretary Timothy Geithner called China’s policy on currency untenable. 

“If China does not allow the currency to appreciate more rapidly, it will run the risk of seeing domestic inflation accelerate and face greater risk of a damaging rise in asset prices, both of which will threaten future growth,” Geithner said shortly before the Chinese president’s visit to Washington last month. 

Sen. Chuck Schumer (D-N.Y.) and other Senate Democrats also indicated last month that they would introduce a measure that could lead to imports from China being slapped with higher tariffs if the country is found to be manipulating the renmibi. 

For his part Rep. Sandy Levin (D-Mich.), the ranking member of the House Ways and Means Committee, has said he wants to work again with Republicans on his chamber that could also cause Chinese imports to be hit with higher tariffs. 

After the release of Friday’s report, Treasury came under some heat from lawmakers, but found its move supported elsewhere. 

Sen. Max Baucus (D-Mont.), the chairman of the Finance Committee, said in a statement that “China has been given a free pass on its currency practices for far too long. We need to hold China and our other trading partners accountable for their actions, and we must acknowledge – and take steps to remedy – those actions that harm the competitiveness of American businesses and workers.”

But John Frisbie, the president of the U.S.-China Business Council, asserted that Treasury had “made the right call.”

“While USCBC believes that China should allow its exchange rate to better reflect market forces, designating China as a “manipulator” would achieve nothing,” Frisbie said in a statement.