In its semi-annual currency report to Congress on Tuesday, the U.S. Treasury Department said the yuan “remains significantly undervalued” but stopped short of branding China a currency manipulator as former presidential candidate Mitt Romney had threatened to do. From Bloomberg:
China “has substantially reduced the level of official intervention in exchange markets since the third quarter of 2011,” the Treasury said in a statement accompanying its semi- annual currency report to Congress yesterday. The yuan has gained 9.3 percent in nominal terms and 12.6 percent in real terms against the dollar since June 2010, the Treasury said.
“It appears that the strategy of the last two administrations to use diplomacy rather than confrontation in dealing with the yuan’s value is having some positive results,” William Reinsch, president of the National Foreign Trade Council, a Washington-based business group, said in an e-mail after the report. “There is clearly room for further appreciation, however.”
In declining to brand China a manipulator, the Treasury cited the reduced intervention and “steps to liberalize controls on capital movements, as part of a broader plan to move to a more flexible exchange-rate regime.” The U.S. hasn’t designated another nation since 1994, when it named China.
At a forum in Beijing last week, People’s Bank of China Governor Zhou Xiaochuan said that China would seek increased convertibility of its currency as it continues to liberalize its capital markets. The yuan closed at a record high on Tuesday, according to Reuters, but one U.S. legislator reiterated his calls for China to be formally labeled a manipulator so that tangible action can be taken on the issue:
Charles Schumer, the No. 3 Democrat in the Senate and a longtime critic of China’s yuan policy, said the Treasury should label China a manipulator to be able to impose penalties on it.
“It’s time for the Obama administration to rip off the band-aid, and force China to play by the same rules as all other countries,” the New York senator said in a statement.