WORLD / Wall Street Journal Exclusive
US senators press China on yuan
By JASON DEAN (Wall Street Journal)
Updated: 2006-03-22 13:06
http://online.wsj.com/public/article/0,,SB114296503445404278-suxP0EIbdmRKQK
rnT7BVBlPbyog_20060328,00.html?mod=regionallinks
A group of U.S. senators ended their first day of talks in Beijing saying
Chinese leaders need to understand U.S. determination to see a stronger
Chinese currency. But the lawmakers left unclear exactly what China must
do to avert sweeping U.S. tariff legislation.
Senators Charles Schumer, a New York Democrat; Lindsey Graham, a South
Carolina Republican; and Tom Coburn, an Oklahoma Republican, held their
first day of discussions in Beijing Tuesday, meeting with China's foreign
minister and the deputy head of its legislature. Messrs. Schumer and
Graham have proposed a bill that would impose 27.5% tariffs on all
Chinese imports unless Beijing sharply revalues its currency, which the
lawmakers allege is unfairly undervalued. A Senate vote on the bill is
scheduled for March 31.
The senators told reporters later Tuesday that their aim is to impress on
Chinese leaders the seriousness of a backlash in the U.S. against trade
with China.
"Our goal is to let the Chinese government realize that the politics of
this issue is about to get out of hand," Mr. Graham said. He said the
senators are stressing to leaders in Beijing that "if you think the
relations between our two countries are good, you're misreading the tea
leaves back home [in the U.S.]. They're not good, and they're getting
worse."
The Treasury Department has hinted it might label China a "currency
manipulator" in a coming report, which could further exacerbate bilateral
strains.
Under mounting pressure from the U.S., China in July raised the yuan's
value by 2.1% against the dollar and unpegged its exchange rate from the
U.S. currency. The currency has appreciated little since then, even with
a relative surge in recent days. The yuan closed slightly weaker Tuesday
at 8.0277 yuan to the dollar, about 3% stronger than its pre-revaluation
level in July, after hitting highs in recent sessions.
Some economists predict the Chinese currency could breach the
psychologically important eight yuan to the dollar ahead of a planned
visit to Washington by Chinese President Hu Jintao next month. Still,
that level of appreciation is far less than the amount by which U.S.
critics say the Chinese currency is undervalued. Messrs. Schumer and
Graham say the undervalued yuan makes Chinese goods cheaper in the U.S.
and exacerbates a huge U.S. trade deficit with China, which widened 24%
last year to $201.63 billion, according to U.S. data.
All three senators said they believe the tariff bill would pass both
houses of Congress, with enough votes to overcome any attempt by
President Bush to veto it.
The senators left open the possibility that their trip could persuade
them to push back the vote on the Schumer-Graham bill or even shelve it.
But it was unclear what exactly they need to hear for that to happen.
"There are no magic words," Mr. Schumer said. "We have to get the feeling
that they are on a path, in a reasonable period of time, to stop
manipulating the currency, to let it float freely."
The senators are to meet with other senior Chinese officials, including
the central bank chief and the commerce minister, Wednesday and Thursday.
The prospect that the Schumer-Graham bill, which has long been discussed,
might pass has sparked concern among some U.S. economists and
businesspeople. Stephen Roach, chief economist for U.S. investment bank
Morgan Stanley, said he believes tariffs of the sort the senators are
proposing would be a "mistake" that could prompt Beijing to cut back on
purchases of U.S. Treasurys, leading to a weaker dollar and higher
interest rates.
"At a time when the U.S. is more dependent on foreign capital than ever
before, to impose tariffs not just on a major provider of goods, but a
major lender of capital, I think would be close to economic suicide,"
said Mr. Roach, who also is in Beijing for a conference with Chinese
officials and global executives.
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