China denies US warning of undervalued currency

Thursday, 17 April 2014 00:00 -     - {{hitsCtrl.values.hits}}

REUTERS: China rejected on Wednesday a warning from the Obama administration that its currency was too weak, urging the United States to recognise that China aims to “perfect and regulate” the exchange rate system. The Obama administration on Tuesday warned China that its currency was too weak and expressed doubt over the Asian giant’s resolve to let market forces guide the value of the yuan. In a semi-annual report to Congress, the US Treasury stopped short of declaring China a currency manipulator, but singled it out among large US trading partners for its currency practices. “Recent developments in the ... exchange rate rise particularly serious concerns if they presage a retreat from China’s announced policy of allowing the exchange rate to reflect market forces,” the Treasury said. Chinese Foreign Ministry spokeswoman Hua Chunying said China would continue with the “reform of its renminbi exchange rate mechanism”. The yuan is also known as the renminbi. “We aim to perfect and regulate the exchange rate system,” Hua said at a daily news briefing. “We hope the US can correctly recognise this and appropriately deal with the relevant trade issues related to the RMB exchange rate, and take a cooperative and constructive attitude with the Chinese side, making unceasing shared efforts to push forward the trade cooperation between China and the US.” The United States sees currency management by China and other developing countries as an impediment to rebalancing the global economy away from a situation in which rich nations borrow heavily to buy goods from poor nations. Emerging markets often build dollar reserves by keeping their currencies weak to spur more exports, pushing developed economies to borrow to cover their import bill. The United States initially welcomed a move by China in March to allow the yuan currency to vary more in value. But in the month prior to China’s trading band decision, there were reports of “heavy intervention” by Chinese authorities to keep the yuan’s value low, the US Treasury said in its report. Many US lawmakers and firms have long complained that China deliberately undervalues the yuan to gain an edge in international markets. Some developing countries argue that America’s easy-money interest rate policies result in a flood of cash into their markets, pushing them to build up dollar reserves to intervene in their currencies and keep them stable. In the report, the Treasury said currency interventions and dollar reserve accumulation appeared to have increased globally in the second half of 2013.