Bush Administration: China does not manipulate its currency!

Despite the more than $1 trillion US dollars that the Chinese government has collected as a byproduct of their currency manipulations, the Bush administration reported to Congress that China does not manipulate its currency. Here's a selection from the Associated Press story by Martin Crutsinger from May 15:

In a report it is required to deliver to Congress every six months, the administration said China needed to address the "substantial undervaluation" of its currency compared with the dollar. But the report said China did not meet the technical requirements under the law to be designated as a currency manipulator....

Treasury Secretary Henry Paulson had hoped to use a new series of high-level talks with Chinese officials to get the country to move more quickly in addressing not only the currency issue but a number of other contentious trade issues. However, those talks so far have had only limited results....

The National Association of Manufacturers, one of the leading groups pushing the administration to take a tougher line on China, expressed disappointment that the administration had chose again to refrain from citing China as a currency manipulator, a designation that would trigger negotiations between the two countries over the issue.

"Everybody in the world knows that China is manipulating its currency," said Frank Vargo, NAM's vice president for international affairs. "Treasury is continuing to hide behind the fig leaf of contending it can't determine China's intent."...

China is a major holder of dollar-denominated investments such as U.S. Treasury securities, which it buys to keep the dollar from falling in value against the yuan....

Sen. Benjamin Cardin, D-Md., said he could not understand why the administration was not taking a tougher approach on the currency issue. Sen. George Voinovich, R-Ohio, said his constituents were "livid" about the China trade issue. He accused the administration of failing to get tough with Beijing because the administration wanted Chinese support for dealing with North Korea over nuclear weapons.

In a speech in Beijing, Commerce Secretary Carlos Gutierrez warned that Chinese and U.S. officials needed to guard against rising economic nationalism in both countries, calling it a "troubling trend" that threatened progress on building economic partnerships between the two countries.

Hat tip: American Economic Alert

Howard