China, according to the US Treasury, cannot technically be classified as a currency manipulator. China has not used the undervalued yuan for a trade advantage, but several Congressmen and Treasury Secretary Henry M. Paulson Jr. have expressed concern over China’s export-driven economy, and they are seeking a solution.
From the New York Times:
A group of leading Republican and Democratic senators, signaling growing Congressional impatience with Chinese trade practices, proposed legislation today aimed at forcing penalties on China over its policy of suppressing the value of its currency to promote exports.
The legislation, which appeared likely to be opposed by the Bush administration, was offered by Senators Max Baucus, a Montana Democrat, and Charles Grassley, an Iowa Republican. They are. respectively, the chairman and the ranking Republican on the Senate Finance Committee, which oversees trade measures.
Joining them are Senators Charles E. Schumer, the New York Democrat, and Lindsey Graham, the South Carolina Republican, both of whom had sponsored a tougher version of the bill last year calling for tariff increases of 27 percent on Chinese goods. But that bill was withdrawn under administration pressure.
White House officials say Treasury Secretary Henry M. Paulson Jr. has warned China repeatedly that if it does not open its economy more to outside investments and exports, and make more progress in letting its currency float more freely, the administration may not be able to stop trade legislation against it. [Full Text]
See also Bloomberg’s article on China’s currency.