Pressure Grows for China to Revalue its Currency.

Navigation: Main page

Author: Sissell, Kara

ASIA/PACIFIC

Senators Charles Grassley. (R., IA) and Max Baucus (D., MT) say they are putting the finishing touches on legislation aimed at resolving a trade dispute with China. The rift stems from China's over-valuation of its currency, the renmimbi (Rmb), and the failure to follow through on its July, 2005, promise to loosen the Rmb's peg to the dollar. Economists and lawmakers estimate that China's currency is overvalued by up to 40%. A revaluation of the Rmb would help boost chemical exports to China, ACC says.

Grassley and Baucus plan to introduce the legislation this week, prior to the visit to the U.S. in late April by Chinese President Hu Jintao. Grassley's aides would not give details on the bill, but say it would be a "constructive" alternative to legislation introduced by Senators Charles Schumer (D., NY) and Lindsey Graham (R., SC), which would impose an across-the-board 27.5% tariff on Chinese goods if China does not revalue its currency. The Senate is scheduled to vote on Schumer's bill on March 31.

Schumer and Graham led a Congressional delegation to China earlier this month to look into what China is doing to resolve U.S.'s concerns. "If China is to be a player in the world economy, they must play by the rules every other country has to play by," Schumer says. "We are pushing the currency issue so strongly because it is our view that if you believe in free trade, then the biggest economies in the world have to play fair and abide by the rules of the game," he says. Schumer says China must adjust its currency to "at or neat" its fair market value.

Graham says China's policies on currency and intellectual property concerns ate taking their toll on U.S.-China trade relations. "We must have a comprehensive strategy to deal with China. This includes mechanisms to ensure the Chinese play by the rules," Graham says.

The U.S.'s increasing trade deficit has generated renewed concerns about China's currency. A U.S. Trade Representative (USTR) report issued in February estimated the trade deficit with China reached $200 billion in 2005. The trade gap continue to widen in January to $18 billion, a 10% increase over the previous month.

PHOTO (COLOR): Schumer: China has to play by the rules.

~~~~~~~~

By Kara Sissell