Chinese School - China urged to move more quickly on currency

BIZCHINA / American Reaction

China urged to move more quickly on currency

(AP)
Updated: 2007-06-20 22:21

WASHINGTON (AP) _ For the sake of the global economy, China needs to
accelerate the pace of currency reform and overhaul its economy to be
less dependent on exports, US Treasury Secretary Henry Paulson said
Wednesday.

Testifying before the House Financial Services Committee, Paulson
defended the Bush administration's decision last week not to cite China
as a currency manipulator in a report it is required to make to Congress
twice a year.

While the administration did not believe China met the technical
requirements to be branded as a currency manipulator, Paulson said the
administration would continue to press Beijing to move more quickly to
let the yuan rise in value against the dollar.

"The risk that China now faces is moving too slowly on exchange rate
reform, rather than moving too quickly," Paulson said in prepared remarks
for a hearing.

American manufacturers contend the yuan is undervalued by as much as 40
percent. That makes Chinese goods cheaper for American consumers while
increasing the price the Chinese must pay for American products.

The administration is under growing pressure to take a get-tough approach
with the Chinese in light of soaring trade deficits. They include an
imbalance of $233 billion last year with China alone, the largest ever
recorded with a single country.

Paulson said that China must overhaul its economy so that it is less
dependent on sales to the rest of the world and gets more support from
domestic demand. He said this could be done by boosting competition in
such industries as financial services and improving the country's social
safety net, which would address China's high savings rate that is spurred
by concerns about the lack of pensions and health care.

Paulson said the administration would keep raising these issues as part
of new high-level talks known as the Strategic Economic Dialogue. The
second of those meetings was held in Washington in May and a third round
is scheduled for China in December.

Critics in Congress have complained that these discussions have so far
produced little progress in narrowing the soaring trade gap with China,
which they say has played a role in the loss of more than 3 million
manufacturing jobs since 2000.

Unhappy with the lack of action on the currency front, lawmakers
introduced two new Senate bills last week that would require the
administration to take a tougher line in its dealings with China. Those
measures join a host of other proposals put forward by lawmakers who are
feeling political pressure from constituents unhappy with the loss of
American manufacturing jobs.

In his testimony, Paulson cautioned that the US economy would be harmed
if it raised barriers to trade.

"I have been and will continue to be an outspoken advocate for
maintaining and extending open trade. This is fundamental to the
long-term competitiveness of the US economy," he said. "We must resist
the sentiment that favors economic isolationism."

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