U.S. declines to name China currency manipulator

Tue Nov 27, 2012 5:42pm EST
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By Anna Yukhananov

WASHINGTON (Reuters) - The Obama administration on Tuesday said China's currency remained "significantly undervalued" but stopped short of labeling the world's second-biggest economy a currency manipulator.

In a congressionally mandated semi-annual report, the U.S. Treasury noted that yuan had risen 12.6 percent against the U.S. dollar in inflation-adjusted terms since June 2010. An official said it was up 9.7 percent on a nominal basis through Tuesday, when it closed at a record high.

Although Beijing keeps the yuan, also known as the renminbi, in a tight trading band, the Treasury said China did not meet the legal requirements to be deemed a currency manipulator. The label is largely symbolic but would require Washington to open discussions with Beijing on adjusting the yuan's value.

The Chinese government had "substantially" reduced its intervention in foreign exchange markets since the third quarter of 2011 and loosened capital controls, the Treasury said in the report, which examines the currency practices of major U.S. trading partners.

"In light of these developments, Treasury has concluded that the standards ... have not been met with respect to China," it said. "Nonetheless, the available evidence suggests the renminbi remains significantly undervalued."

During the U.S. presidential campaign, Republican candidate Mitt Romney pledged to label China a manipulator on his first day in office to show he would be tougher on the United States' chief economic competitor than President Barack Obama.

Many U.S. businesses and lawmakers complain that China keeps the value of its currency artificially low to gain an advantage in trade.

But an international consensus is growing that the yuan is closing in on its fair value after about a decade at an artificially weak level. The International Monetary Fund softened its language on the yuan in July.   Continued...

A clerk counts U.S. dollar banknotes after counting Chinese 100 Yuan banknotes at a branch of the Agricultural Bank of China in Qionghai, China's southmost Hainan province, November 12, 2012. REUTERS/China Daily