Snow: China should get credit for yuan moves
(USAtoday.com)
Updated: 2005-11-30 12:33

WASHINGTON — Treasury Secretary John Snow praised China Tuesday for its initial moves toward a floating currency and rejected criticism that the Bush administration has been too soft on Beijing.

Treasury Secretary John Snow speaks during a news conference in Beijing in this October 17, 2005 photo. [Reuters]

In an interview with USA TODAY and Gannett News Service, Snow said the Chinese deserved credit for removing the yuan's fixed link to the value of the dollar in July, opening the door to additional moves and setting a long-term goal of a floating exchange rate.

"They have agreed with our basic proposition that the currency should be more flexible; it should reflect underlying market conditions. The disappointment is they haven't moved faster," Snow said. "We're going to continue to press them to move faster. But I don't think we should take the view that nothing has happened."

U.S. manufacturers say the Chinese yuan is substantially undervalued, making Chinese goods artificially inexpensive. This year, the U.S. trade deficit with China is expected to top a record $200 billion.

Monday, the Treasury Department released a report required under U.S. trade law, which concluded that China is not manipulating the yuan's value to gain trade advantages.

The yuan strengthened to a record Tuesday of 8.0796 to $1 — about 2.3% stronger than the rate before the July move. But that's just a fraction of the appreciation some beleaguered manufacturers and their allies are demanding.

Sens. Charles Schumer, D-N.Y., and Lindsay Graham, R-S.C., may seek a vote as soon as next month on their legislation to impose a 27.5% tariff on Chinese goods until the yuan is substantially revalued.

The administration opposes that measure, but Snow sought to claim common ground with congressional critics.

"We're all on the same wavelength. The only place we differ is in how best to get the (currency) matter advanced," he said.

Treasury will assess China's progress toward greater exchange rate flexibility in preparing the next report in the spring.

But Snow said it would be "inadvisable" to specify what China needed to do to avoid being labeled a currency manipulator. (Such a judgment would only initiate bilateral consultations. But it is seen as a symbolic step that could unleash protectionist sentiment on Capitol Hill.)

"There's real action there. ... We think they're making progress. But the test of progress is actual flexibility," he said.