http://online.wsj.com/article/SB10001424052970204450804576625413832295824.html?mod=djkeywordOctober 11, 2011
Senate Passes Bill Targeting China's Yuan PolicyThe U.S. Senate voted Tuesday to pass legislation targeting China's management of its currency, the yuan, underscoring U.S. frustration with one of its largest trading partners.
Although the bill is unlikely to become law, the Senate debate has kept a public focus on the currency issue as the two countries remain at odds over China's control of the yuan. In recent days, the Chinese central bank has intervened in currency markets to drive up the value of the yuan against the dollar, a development in line with U.S. goals.
A bipartisan group of 63 lawmakers voted in favor of legislation intended to force the White House to be more aggressive in seeking tariffs and other penalties against countries with "misaligned" currencies, while 35 lawmakers opposed it. The bill is aimed at helping U.S. firms, which argue that Beijing's policy of holding down the value of the yuan benefits China's exporters by acting as a trade subsidy. Opponents of the bill say that if it becomes law, Beijing might retaliate against U.S. firms based in China, possibly sparking a trade war.
Despite wide support for the legislation in the House, Republican House leaders have signaled they have little interest in scheduling a vote. Majority Leader John Boehner (R., Ohio) has called the approach "dangerous," and has insisted he will resist pressure for a House vote.
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That may be the best outcome for the Obama administration. White House officials have opposed action by Congress in the past while trying to leverage the threat of congressional action to press China for a faster rate of currency appreciation.
President Barack Obama weighed in on the issue last week when he accused China of manipulating the yuan and "gaming the trading system to its advantage." But he also expressed concern about how the Senate bill might affect U.S. international obligations.
Chinese officials have objected to the Senate effort. But China supporters say it is unlikely that Beijing will take concrete action against the U.S. unless the bill is enacted.
China has allowed its currency to steadily appreciate since June 2010, with the yuan rising at a nearly clockwork pace of 0.5% a month regardless of market conditions. Chinese officials have reached a consensus that 6% or so in annual yuan appreciation is enough to help fight domestic inflation and, eventually, lift the currency to a point where it could float freely.
Mr. Obama and Treasury Secretary Timothy Geithner have said that pace isn't adequate. But given the expected change in leadership in Beijing next year, U.S. officials acknowledge privately that politicians are unlikely to make a substantial change to the speed.
The Senate's vote on the bill highlights the role China could play in the 2012 elections. Some lawmakers have seized on the country as a reason the U.S. has a faltering economic recovery, a central point in current political debate.
Business organizations such as the Business Roundtable and U.S. Chamber of Commerce, say the bill could spur trade disputes that would hurt U.S. interests. Sen. Joe Lieberman (I., Conn.) said Tuesday he worried about the countries engaging in a "mutually damaging trade war."
