UPDATE 2-China forex bill has high US Senate support-author
Thu Apr 22, 2010 2:37pm EDT
By Paul Eckert
WASHINGTON, April 22 (Reuters) - U.S. legislation aimed at stopping China from "manipulating" its currency by imposing duties on Chinese products would get overwhelming support in the U.S. Senate, co-author Senator Lindsey Graham said on Thursday.
"We'd get 80 or 90 votes if we could ever get this sucker to the floor," the South Carolina Republican lawmaker told a U.S. Senate Banking Subcommittee on Economic Policy hearing.
Graham said he hoped to move the bill, co-authored with 13 other senators, in the 100-member Senate this year.
"I understand why the administration is reluctant to push China, but unfortunately we're running out of time. This will be the year," he told reporters outside the hearing.
Many U.S. lawmakers complain that China's currency, which is also known as the renminbi, is undervalued by as much as 40 percent, giving its companies an unfair price advantage in international trade.
Analysts expect that China is poised to resume policies that would allow its yuan to trade more widely against the currencies of trading partners.
Nicholas Lardy, a China expert at the Peterson Institute for International Economics, said Treasury Secretary Timothy Geithner's decision to postpone an April 15 official determination on whether China is a currency manipulator allowed scope for Chinese action.
"He's given the Chinese quite a bit of leeway, so I would think somewhere in here, perhaps prior to the S&ED in late May, they will begin to move their currency," he said, referring to the annual U.S.-China Strategic and Economic Dialogue.
A meeting of the G20 industrialized and major emerging economies in Canada in June is another point on the calendar that might draw Chinese policy action, Lardy said.
Most analysts say any Chinese move would bring only a slight appreciation of the Chinese currency.
"I can't live with small changes in the yuan," Graham told the panel.
"I'm looking for systematic change," he said.
Graham and Democratic Senator Charles Schumer co-authored a bill in 2005 that threatened to slap a 27.5-percent across-the-board tariff on Chinese goods because of its currency policies.
However, they later withdrew that legislation, as China revalued the yuan by 2.1 percent in July 2005 and steered the currency with reference to a basket of currencies. Beijing allowed the yuan to rise a further 19 percent before it effectively froze the rate near 6.83 per dollar in July 2008 to help its exporters ride out the global credit crunch.
Graham said China was "addicted to exports" and that policy needed to change to cut persistent Chinese trade surpluses, while the United States needed to increase its savings and take other steps to reduce chronic deficits.
Derek Scissors, a China economist at the Heritage Foundation told the Senate Banking subcomittee pressing for a yuan appreciation "is not going to accomplish much of anything" when Beijing could offset a stronger currency with a range of subsidies to state-owned firms that dominate China's economy.
"We'd be much better off skipping over renminbi revaluation and going to what really matters, which is state domination of the economy in China and the budget deficit in the U.S.," he said.
Thu Apr 22, 2010 2:37pm EDT
By Paul Eckert
WASHINGTON, April 22 (Reuters) - U.S. legislation aimed at stopping China from "manipulating" its currency by imposing duties on Chinese products would get overwhelming support in the U.S. Senate, co-author Senator Lindsey Graham said on Thursday.
"We'd get 80 or 90 votes if we could ever get this sucker to the floor," the South Carolina Republican lawmaker told a U.S. Senate Banking Subcommittee on Economic Policy hearing.
Graham said he hoped to move the bill, co-authored with 13 other senators, in the 100-member Senate this year.
"I understand why the administration is reluctant to push China, but unfortunately we're running out of time. This will be the year," he told reporters outside the hearing.
Many U.S. lawmakers complain that China's currency, which is also known as the renminbi, is undervalued by as much as 40 percent, giving its companies an unfair price advantage in international trade.
Analysts expect that China is poised to resume policies that would allow its yuan to trade more widely against the currencies of trading partners.
Nicholas Lardy, a China expert at the Peterson Institute for International Economics, said Treasury Secretary Timothy Geithner's decision to postpone an April 15 official determination on whether China is a currency manipulator allowed scope for Chinese action.
"He's given the Chinese quite a bit of leeway, so I would think somewhere in here, perhaps prior to the S&ED in late May, they will begin to move their currency," he said, referring to the annual U.S.-China Strategic and Economic Dialogue.
A meeting of the G20 industrialized and major emerging economies in Canada in June is another point on the calendar that might draw Chinese policy action, Lardy said.
Most analysts say any Chinese move would bring only a slight appreciation of the Chinese currency.
"I can't live with small changes in the yuan," Graham told the panel.
"I'm looking for systematic change," he said.
Graham and Democratic Senator Charles Schumer co-authored a bill in 2005 that threatened to slap a 27.5-percent across-the-board tariff on Chinese goods because of its currency policies.
However, they later withdrew that legislation, as China revalued the yuan by 2.1 percent in July 2005 and steered the currency with reference to a basket of currencies. Beijing allowed the yuan to rise a further 19 percent before it effectively froze the rate near 6.83 per dollar in July 2008 to help its exporters ride out the global credit crunch.
Graham said China was "addicted to exports" and that policy needed to change to cut persistent Chinese trade surpluses, while the United States needed to increase its savings and take other steps to reduce chronic deficits.
Derek Scissors, a China economist at the Heritage Foundation told the Senate Banking subcomittee pressing for a yuan appreciation "is not going to accomplish much of anything" when Beijing could offset a stronger currency with a range of subsidies to state-owned firms that dominate China's economy.
"We'd be much better off skipping over renminbi revaluation and going to what really matters, which is state domination of the economy in China and the budget deficit in the U.S.," he said.