Analysis: U.S. concern on China currency fades as yuan grinds higher

Sun Mar 10, 2013 11:06am EDT
 
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By Doug Palmer

WASHINGTON (Reuters) - After years of grabbing the spotlight in U.S.-China economic relations, U.S. concerns over the value of Beijing's currency appear to be fading, giving ground to newer issues like cyber-security and trade secret theft.

Some lawmakers continue to argue a weak Chinese yuan is robbing jobs from the United States. But action to force a change is unlikely and the issue will probably remain on the back burner as long as the U.S. economy continues to improve.

An increase in the value of the yuan, a big drop in China's global trade surplus and a rise in labor costs that has made Chinese products less competitive have conspired with a pickup in U.S. job growth to take the wind out of Washington's sails.

On top of that, the United States has faced fury from other countries for an aggressive easing of monetary policy that critics contend seeks to drive down the dollar, a charge that puts Washington in a tough spot to criticize China.

"China's currency regime has ceased to be a flash-point in U.S.-China economic relations," said Eswar Prasad, senior professor of trade policy at Cornell University and a former International Monetary Fund official.

Prasad says the U.S. administration has shifted its attention to issues such as increased market access for U.S. manufacturing firms and financial institutions that want to do business in China, and better protection of intellectual property rights.

U.S. President Barack Obama, attacked during the presidential campaign by challenger Mitt Romney for failing to label China a currency manipulator, did not even address the issue in his recent State of the Union speech.

But he came out swinging on cyber-security concerns in remarks seen directed at China.   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