On Sept 27 China called for US Senators Charles Schumer and Lindsey Graham to halt their bill threatening tariffs on goods from China if Beijing does not significantly raise the value of its currency.
Schumer, a New York Democrat, and Graham, a South Carolina Republican, said after meeting US Treasury Secretary Henry Paulson that they needed to have further discussions before making a final decision in the next couple of days on whether to hold a vote.
“We hope the US senators will objectively and rationally look at problems occurring in the process of the rapid development of Sino-US trade relations and stop deliberation of the bill that could damage Sino-US trade cooperation,” the foreign ministry said in a statement faxed to Reuters.
The bill, which is opposed by most US business groups, directs the White House to impose a 27.5% tariff on goods from China if Beijing does not significantly raise the value of its currency within six months.
The proposed legislation reflects a widespread US view that China’s yuan is significantly undervalued, giving Chinese companies an unfair trade advantage over US firms.
Chinese officials have consistently pledged to make the yuan more flexible over time, saying any change would mainly stem from the needs of China’s economy.
Chinese government economists also said it would be advisable for Schumer and Graham to drop their bill, on which the two had said earlier they might push for a vote.
“Their proposal itself violates international trade principles and it would be very wise for them to drop it,” said Ba Shusong, vice head of the financial research institute at the Development Research Centre, a think tank under the cabinet.
The US House of Representatives would also have to pass the bill for it to become law. The Bush administration has opposed the Senate bill, but has not explicitly issued a threat to veto it if it is approved by Congress.
Schumer and Graham have agreed four times since April 2005 to delay a vote on the bill.
China’s yuan quickened its pace of appreciation and hit a fresh post-revaluation high against the dollar on Sept. 27 amid speculation that Beijing and Washington may have reached an understanding on the Chinese currency’s rise.
It traded as high as 7.9025 to the dollar, close to the psychologically important level of 7.9000. It has now appreciated a further 2.6% since it was revalued by 2.1% and freed from a peg to the dollar in July 2005.
Gao Huiqing, a senior economist at the State Information Centre, a government think tank, said that even if US pressure for the yuan to appreciate appeared to be waning now, such a trend would be short-lived.
“Every time after top US officials visit China, their pressure on yuan appreciation eases,” Gao said.
Many analysts believe US pressure could be counterproductive.
Paulson visited China recently, where the two countries announced the start of a new strategic economic dialogue that would address the long-term issues in their relationship. (Reuters)