By Glenn Somerville and Doug Palmer
WASHINGTON, April 15 (Reuters) - The U.S. Treasury Department on Wednesday declined to label China a currency manipulator, retreating from tough talk last year when a campaigning Barack Obama said Beijing had kept its currency's exchange rate unfairly low.
In a semiannual report to Congress on currency practices of key trading partners, the Treasury said all were suffering from the current global economic downturn, but said none manipulate their currencies for trade advantage.
While the Treasury said it 'remains of the view that the yuan is undervalued,' as shown by China's huge trade surpluses and foreign exchange reserves, it did not estimate how much the yuan, also called the renminbi, should be trading at.
Both Obama while campaigning for president, and Timothy Geithner after he became Treasury secretary, had explicitly said that China manipulates its currency's value so the report's findings that it does not may provoke lawmakers' anger.
In a nod to business groups and politicians who remain critical of Beijing's currency practices, the Treasury said it will keep pressing Chinese authorities at every turn to allow more exchange rate flexibility and to take steps to spur domestic demand.
Business groups' reaction to the Treasury announcement was mixed.
The National Association of Manufacturers said it was 'a missed opportunity' on Treasury's part, adding it was likely to continue to be troublesome.
'China's currency is very undervalued and ... it has to be dealt with,' said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. 'The longer it's not dealt with, the more difficult it gets to resolve both for China and the United States.'
But Rob Nichols, president of the Financial Services Forum, said it was a 'sensible' approach to a complicated issue.
'The most effective way to achieve the goal of a flexible, market-based exchange rate in China, is to maintain the engagement posture and open dialogue under way,' Nichols said.
At a briefing, a senior Treasury official said the White House was consulted during preparation of the report. He said current global economic conditions were much bleaker now than has been the case for the past decade when U.S. anger at alleged China currency manipulation was on the rise.
'The financial crisis has really changed the context. We're looking at a global recession,' the official said.
Last year, Obama told the Ohio Conference on Fair Trade that currency manipulation by China gave it an unfair trade advantage that cost American jobs and vowed to take a harder line.
'The Bush administration has utterly failed to address this growing threat to U.S. business,' Obama said. 'I am committed to tackling this problem and ensuring that all trade manipulations are addressed by the U.S. government.'
In January, Geithner told Congress that Obama, backed by a wide range of economists, 'believes that China is manipulating its currency.' That heightened expectations that the Obama administration might be ready to shift policy and name China as a manipulator.
If that happened, Treasury would have to begin talks with Beijing and involve the International Monetary Fund in the process, possibly an uncomfortable step since the United States is counting on China to keep buying its debt securities.
In the 52-page currency report, Treasury said Beijing has allowed the yuan to appreciate 16.6 percent between June 2008 and February 2009 and that, as the financial crisis intensified, the yuan appreciated slightly against the dollar.
In addition, Treasury said China has put in place a large fiscal stimulus program, second in size only to the United States, and said that should act as a spur to domestic demand that will help rebalance global growth.
In a statement, Geithner said measures so far 'should be just a beginning to a series of policy steps to rebalance the Chinese economy so that economic growth is more dependent on domestic demand, particularly private consumption.'
((Reporting by Glenn Somerville and Doug Palmer; editing by Gary Crosse))
((glenn.somerville@thomsonreuters.com; +1-202-898-8377; Reuters Messaging: glenn.somerville.reuters.com@reuters.net)) Keywords: USA ECONOMY/CURRENCY (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, April 15 (Reuters) - The U.S. Treasury Department on Wednesday declined to label China a currency manipulator, retreating from tough talk last year when a campaigning Barack Obama said Beijing had kept its currency's exchange rate unfairly low.
In a semiannual report to Congress on currency practices of key trading partners, the Treasury said all were suffering from the current global economic downturn, but said none manipulate their currencies for trade advantage.
While the Treasury said it 'remains of the view that the yuan is undervalued,' as shown by China's huge trade surpluses and foreign exchange reserves, it did not estimate how much the yuan, also called the renminbi, should be trading at.
Both Obama while campaigning for president, and Timothy Geithner after he became Treasury secretary, had explicitly said that China manipulates its currency's value so the report's findings that it does not may provoke lawmakers' anger.
In a nod to business groups and politicians who remain critical of Beijing's currency practices, the Treasury said it will keep pressing Chinese authorities at every turn to allow more exchange rate flexibility and to take steps to spur domestic demand.
Business groups' reaction to the Treasury announcement was mixed.
The National Association of Manufacturers said it was 'a missed opportunity' on Treasury's part, adding it was likely to continue to be troublesome.
'China's currency is very undervalued and ... it has to be dealt with,' said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. 'The longer it's not dealt with, the more difficult it gets to resolve both for China and the United States.'
But Rob Nichols, president of the Financial Services Forum, said it was a 'sensible' approach to a complicated issue.
'The most effective way to achieve the goal of a flexible, market-based exchange rate in China, is to maintain the engagement posture and open dialogue under way,' Nichols said.
At a briefing, a senior Treasury official said the White House was consulted during preparation of the report. He said current global economic conditions were much bleaker now than has been the case for the past decade when U.S. anger at alleged China currency manipulation was on the rise.
'The financial crisis has really changed the context. We're looking at a global recession,' the official said.
Last year, Obama told the Ohio Conference on Fair Trade that currency manipulation by China gave it an unfair trade advantage that cost American jobs and vowed to take a harder line.
'The Bush administration has utterly failed to address this growing threat to U.S. business,' Obama said. 'I am committed to tackling this problem and ensuring that all trade manipulations are addressed by the U.S. government.'
In January, Geithner told Congress that Obama, backed by a wide range of economists, 'believes that China is manipulating its currency.' That heightened expectations that the Obama administration might be ready to shift policy and name China as a manipulator.
If that happened, Treasury would have to begin talks with Beijing and involve the International Monetary Fund in the process, possibly an uncomfortable step since the United States is counting on China to keep buying its debt securities.
In the 52-page currency report, Treasury said Beijing has allowed the yuan to appreciate 16.6 percent between June 2008 and February 2009 and that, as the financial crisis intensified, the yuan appreciated slightly against the dollar.
In addition, Treasury said China has put in place a large fiscal stimulus program, second in size only to the United States, and said that should act as a spur to domestic demand that will help rebalance global growth.
In a statement, Geithner said measures so far 'should be just a beginning to a series of policy steps to rebalance the Chinese economy so that economic growth is more dependent on domestic demand, particularly private consumption.'
((Reporting by Glenn Somerville and Doug Palmer; editing by Gary Crosse))
((glenn.somerville@thomsonreuters.com; +1-202-898-8377; Reuters Messaging: glenn.somerville.reuters.com@reuters.net)) Keywords: USA ECONOMY/CURRENCY (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.