China rejects U.S. currency criticism
U.S. Treasury could name Beijing 'manipulative trade partner'
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(CNN) -- Beijing has rejected U.S. criticism that its currency policy has turned China into a "manipulative trade partner" and that the yuan should quickly be revaluated.
Chinese Commerce Minister Bo Xilai said Wednesday that those charges, made by U.S. Treasury Department a day earlier, were unfounded.
"I believe they are not reasonable," Bo told Reuters.
China has been pegged the yuan near 8.28 per dollar since the 1997-98 Asian financial crisis.
That fixed exchange rate has been the focus of claims by critics in the United States that its prices from exported goods are artificially low.
The low prices, critics say, put unfair pressure on U.S. manufacturers, who cannot compete on the "China price" of goods such as textiles, electronics, and other manufactured goods.
On Tuesday, U.S. Treasury Secretary John Snow said "it's our view that the time has come" for China to have more flexible exchange rates.
A Treasury report said that if China continued its current trends without substantial alteration, its policies would likely meet the statute's technical requirements for designation as a manipulative trading partner.
"Current Chinese policies are highly distortionary and pose a risk to China's economy, its trading partners and global economic growth," it said.
However, Snow stopped short of saying that the Chinese should allow their currency to float freely along with the dollar, euro and other world currencies.
Snow said the Chinese financial system, while making great progress in recent years, was not ready for the stress of a free-floating currency.
Meanwhile on Wednesday, a senior Chinese official added his voice to the debate, reaffirming an assertion this week by Premier Wen Jiabao that China would not be pressured into changing its currency policy.
"We agree with many of you that a more flexible regime would be better for China's economy. But there is no timeframe for such a change as conditions are not ready yet," Reuters quoted Wei Benhua, deputy chief of China's foreign exchange regulator, as telling a trade conference in Singapore.
Wei said accusations that China was deliberately holding down the yuan were groundless and told the United States to "put its own house in order before blaming others" for its trade deficit.
On Tuesday, Vice Premier Zeng Peiyan told a business forum on Beijing that China would push forward steadily with reform of the yuan. (Full story)
Snow's comments on Tuesday came as the United States was releasing its twice yearly "Report to Congress on International Economic and Exchange Rate Policies."
The Treasury Secretary said the United States had concluded in the last six months that the Chinese were now capable of adding more flexibility to their exchange rate.
An adjustment would make Chinese goods more expensive in the United States, but would make U.S.-made goods cheaper for Chinese companies and consumers.
U.S. exporters claim the yuan is as much as 40 percent undervalued, making Chinese goods unfairly cheap.
Snow added that the Chinese leaders have assured him that China wishes to move to a more flexible system.
