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U.S. Congress likely to pressure China on yuan

Updated On: Sep 30, 2010

In a largely symbolic but still significant move, the US Congress has authorized the Obama administration to threaten China over its currency policy with punitive tariffs on imports.

The decision reflects growing concern in the United States that China's yuan, which some economists believed is undervalued to promote its exports, is costing manufacturing jobs, sustaining unemployment, and contributing to the trade deficit.

In 2005, a similar strategy worked, as Congress convinced China to end the fixed peg and allow it to appreciate by more than 20 per cent until the 2008 financial crisis, when it was again pegged.

The yuan moved to a floating peg earlier this year, but has so far failed to appreciate significantly. Tough rhetoric by US Treasury Secretary Tim Geithner as well as Obama himself has failed to effect a significant increase in 2010.

Sources:

Congress Likely to Urge China to Raise Its Currency [New York Times]

US Congress Moves to Punish China on Currency [AFP]







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