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Pressure growing on China to revalue currency

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1 Pressure growing on China to revalue currency on Wed Mar 24, 2010 6:54 pm

outkastjamz


Pressure growing on China to revalue currency
Congress told US could gain up to 1.2 million jobs from Asian currency revaluations

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Topics:International Martin Crutsinger, AP Economics Writer, On Wednesday March 24, 2010, 4:15 pm EDT
WASHINGTON (AP) -- Pressure on China to allow its currency to rise in value against the dollar intensified on Wednesday with a prominent economist telling Congress that the Obama administration should cite China and four other Asian economies as currency manipulators in a report due in April.

C. Fred Bergsten, head of the Peterson Institute for International Economics, told the House Ways and Means Committee on Wednesday that a successful campaign to pressure Asian nations on the currency issue could create as many as 1.2 million new American jobs.

Bergsten said that not only was China keeping its currency undervalued against the dollar, but Hong Kong, Malaysia, Singapore and Taiwan were keeping their currencies undervalued as well to avoid losing sales in markets where they compete against China.

He said he believed the Chinese yuan was undervalued by about 40 percent against the dollar and the other currencies were similarly undervalued. He said allowing those currencies to rise against the dollar to the proper levels would trim America's trade deficit by $100 billion to $150 billion annually. Last year's current account deficit totaled $419.9 billion.

Bergsten said a fall in the value of the dollar against the various Asian currencies would boost U.S. exports and result in an additional 600,000 to 1.2 million jobs during a time of high unemployment in this country.

Bergsten said that correcting the Chinese and Asian currency misalignments against the dollar would be the "most cost-effective step that can be taken to reduce the unemployment rate in the United States."

Bergsten testified at a hearing called by the House panel to highlight the growing unhappiness in Washington over China's currency policies.

Rep. Sander Levin, D-Mich. and the acting chairman of the Ways and Means Committee, said that the status quo with regard to China's currency system "was not sustainable."

Niall Ferguson, a professor of business administration at the Harvard Business School, said that the administration should brand China a currency manipulator but he said the impact of the U.S.-China trade deficit would not be that significant because China has many other advantages such as low labor costs which contribute to its huge trade surplus with the United States.

"The Chinese authorities are spoiling for a fight," Ferguson told the committee, saying that meant the United States has to make sure that any tensions over currency do not boil over into a full-blown trade war between the two nations which could destabilize financial markets.

Last month, President Barack Obama vowed to "get much tougher" in trade disputes with China while Treasury Secretary Timothy Geithner said recently that he believe China would soon allow its currency to start rising again against the dollar. China allowed the yuan to appreciate by about 20 percent from mid-2005 to mid-2008 but halted the rise after the global economic crisis began to cut deeply into its exports.

The administration has given no hint on how it might rule in the upcoming report, which is due on April 15. Under a 1988 trade law, the Treasury must report to Congress every six months on whether any country has been found manipulating its currency to gain trade advantages.

If China is designated as a currency manipulator, it would trigger negotiations between the two countries and could lead to economic sanctions if the U.S. takes a case before the World Trade Organization and wins a favorable WTO ruling.

China has been cited in five previous reports in the period from May 1992 through July 1994 during the administrations of Presidents George H.W. Bush and Bill Clinton. Those negotiations did not produce any major results and no country has been cited since 1994.

Recently, a group of 14 U.S. senators unveiled legislation that would provide for penalty tariffs to be imposed on Chinese imports if China does not allow its currency to rise in value. Meanwhile, 130 House members sent a letter to the administration urging a tougher approach.

Chen Deming, China's commerce minister and a key defender of the country's exchange rate policies, on Wednesday warned that a stronger Chinese currency would have a global impact.

While some analysts believe China is getting ready to allow its currency to rise in part to stem growing inflationary pressures inside the country, various Chinese leaders have taken a tough line on the issue.

Bergsten said he believed the administration would brand China a currency manipulator in the upcoming report, but Rep. Charles Rangel, D-N.Y., said he doubted the United States was ready to make such a move.

http://finance.yahoo.com/news/Pressure-growing-on-China-to-apf-3372251399.html?x=0

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that would help unemployment

Panhead

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Charles Rangel is an idiot.....useless as Ted Kennedy.

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