President Barack Obama charged on Sept. 29 that China's currency was unfairly undervalued, as U.S. lawmakers prepared to pass a bill to punish Beijing over the weak yuan, blamed here for killing jobs.
"The reason that I'm pushing China about their currency, it's because their currency's undervalued," Obama said, when asked at a "backyard" meeting with voters in midwestern Iowa why he was pressuring Beijing on the issue. "People generally think that they are managing their currency in ways that make our goods more expensive to sell and their goods cheaper to sell here," he added, saying that fueled the yawning U.S. trade deficit with China.
His comments came as the U.S. House of Representatives was set to vote on a bill expanding the powers of the US Commerce Department by allowing it to slap retaliatory tariffs on a nation found to be manipulating its currency's value.
U.S. lawmakers have stepped up charges that China keeps the yuan -- and thus its exports -- artificially cheap, driving U.S. manufacturers out of business and costing thousands of U.S. jobs.
Critics of the bill have warned that, even if successful in forcing China to let market forces decide the yuan's value, the bill will chiefly benefit other Asian economies where manufacturing is still cheaper than in the United States.
If the measure clears the House, the Senate could take up a companion bill after the elections.
Hours before the House vote, China's central bank pledged in a statement on its website to "increase currency flexibility" and vowed to "gradually improve the exchange rate setting mechanism."
The People's Bank of China used nearly identical language in a similar promise in June, after which the yuan strengthened less than two percent against the U.S. dollar.
And China has a history of allowing the yuan to strengthen slightly ahead of events at which it expects to come under heightened pressure over the value of its currency, which critics say is grossly undervalued.
With November 2 mid-term elections fast approaching, the bill enjoys strong support from Obama's Democratic allies and their labor union supporters, as well as his Republican foes, and was expected to win approval. The vote was to come after weeks of assertive lobbying by Washington -- from Obama on down -- for China to take steps on its currency and a range of other issues, including rampant piracy of US intellectual property.
The U.S. president made his case to Chinese Premier Wen Jiabao on the sidelines of the UN General Assembly last week, but his appeal did not appear to yield a breakthrough, and China has denied doing wrong.
While the Obama administration has not taken a formal position on the legislation, US Treasury Secretary Timothy Geithner told lawmakers earlier this month "it is very important that China hear from the Congress" on the issue.
China pledged in June to loosen its grip on the yuan, which had been effectively pegged at about 6.8 to the dollar since mid-2008. Since then, the currency has gained less than two percent against the greenback. The central bank on Sept. 29 set the yuan central parity rate -- the middle of the currency's allowed trading band -- at 6.6936 to the dollar, the strongest rate against the greenback since the summer pledge.
"China is merely pretending to take significant steps on its currency. This suckers' game is never going to stop unless we finally call their bluff," Democratic Senator Chuck Schumer said in a speech on Sept. 28. Schumer, one of the sternest congressional critics of China's currency policy, said Obama's outreach to Wen "got nothing -- nothing, a big goose egg."
At the same time, 181 House members wrote Obama asking that he take steps to blunt China's "predatory" actions to gain "unfair advantage" in environmentally friendly "green" technology and "capture this emerging sector."
They also pushed Obama to ramp up U.S. government resources dealing with alleged unfair dealing by Beijing and create a specialized task force to counter the Asian giant's "increasingly sophisticated unfair trade practices."
Major U.S. trade associations wrote top lawmakers a letter warning the bill could spark a "counterproductive" trade feud that could cost U.S. jobs.
Copyright Agence France-Presse, 2010