China says yuan must not be ‘scapegoat’ for US economic woes

Friday, 15 October 2010 18:17 -     - {{hitsCtrl.values.hits}}

BEIJING: China said Friday the yuan exchange rate must not be used as a “scapegoat” for the United States’ economic woes, ahead of a Treasury Department report that could label the country a currency manipulator.

“The United States can’t use domestic reasons to pass on its domestic employment and economic growth problems (to other nations),” commerce ministry spokesman Yao Jian told reporters.

“The yuan’s rate must not be the scapegoat of US domestic problems.”

Earlier Friday, China set the yuan at its strongest level since policymakers pledged in June to loosen their grip on the currency.

The People’s Bank of China set the yuan central parity rate -- the middle of the currency’s allowed trading band -- at 6.6497 to the dollar.

The Chinese unit has gained nearly 0.5 percent this week and more than 2.6 percent since the summer as US and European lawmakers stepped up calls for a faster appreciation in the currency, which they say is grossly undervalued.

The US Treasury Department’s twice-yearly report on the currency practices of China and other countries is expected to be released later Friday.

Beijing has previously allowed the yuan to strengthen slightly ahead of events at which it expects to come under pressure over the value of its currency, which critics say gives China an unfair trade advantage.

China has consistently rejected any pressure for a fast rise in the yuan, even as it lets it strengthen gradually.  Yao said US impatience with the yuan was part of an American strategy aimed at taking “discriminatory trade measures against Chinese products.”

“Such actions will severely violate WTO rules and will be unreasonable and wrong,” he told reporters at a regular briefing.

The House of Representatives last month passed a bill urging the US government to consider Beijing’s currency policy as an improper trade subsidy and expand the powers of the Commerce Department by allowing it to slap retaliatory tariffs on Chinese goods.  The US Senate has signalled it will take up a companion bill after the November elections.

Pressure on Beijing is unlikely to ease after the politically sensitive US trade deficit with China expanded eight percent to 28.0 billion dollars in August, wiping out the previous record of 27.9 billion dollars in October 2008.

During a visit to Beijing earlier this week, US Senate Finance Committee chairman Max Baucus called for meaningful appreciation in the yuan.  “China’s decision to undervalue its currency has been a persistent thorn in the side of our relationship -- hurting American workers, American exports and American jobs,” Baucus said in a statement on Thursday.

“China must move to allow its currency to appreciate immediately in order for us to move forward.”

But central bank governor Zhou Xiaochuan said on Friday in a magazine linked to the bank that China would continue to manage the yuan’s exchange rate to maintain the currency’s stability.

The yuan is currently allowed to move up or down 0.5 percent from the central parity rate on any given trading day.

Premier Wen Jiabao told European lawmakers last week to back off demands for a 20-40 percent appreciation in the currency.

He warned that such a move would bankrupt many Chinese companies and create social unrest, ultimately increasing global economic instability.

Yao said Friday that Chinese exporters would come under pressure if the yuan gained more than three percent against the dollar this year, Dow Jones Newswires reported.

He added that China’s full-year trade surplus was expected to fall in 2010 after declining nearly 34 percent in 2009.