Chinese currency vote delayed

Two senators sponsoring legislation aimed at forcing China to revalue its currency said yesterday they would hold off pressing for a vote at the urging of Federal Reserve Chairman Alan Greenspan and Treasury Secretary John W. Snow.

Sens. Charles E. Schumer, New York Democrat, and Lindsey Graham, South Carolina Republican, announced the delay after meeting with Mr. Greenspan and Mr. Snow at the Capitol. The lawmakers said they had received indications from the officials that Beijing was on the verge of voluntarily moving to a new currency system.

U.S. manufacturers contend that China’s practice of linking its currency to the dollar has undervalued the yuan by as much as 40 percent, making Chinese goods cheaper in the United States and U.S. products more expensive in China.

The proposed legislation would impose across-the-board penalty tariffs of 27.5 percent on goods imported from China.

Mr. Schumer told reporters after meeting with the top two U.S. financial officials that “they have convinced us that the likelihood of real progress with China on currency valuation is very real and could very well occur in a very short while, in the next few months.”

Mr. Schumer said that because of these assurances, he and Mr. Graham had agreed with Senate leaders to delay a vote until at least September to give both countries time to negotiate further on the currency issue.

Mr. Graham said Mr. Greenspan had convinced him that China was likely to act because it would be in the best interests of the Chinese economy. Beijing could face serious inflation pressures from the amount of money China is spending to keep its currency from rising in value against the dollar.

“By showing flexibility by delaying this vote, we are hopeful that the progress we have seen so far will continue, and we will get a resolution that is a win-win for both countries,” he said.

Mr. Greenspan and Mr. Snow did not talk to reporters after the meeting. Last week, both officials urged Congress not to go ahead with the legislation.

Mr. Greenspan told the Senate Finance Committee that new tariff penalties on Chinese goods would save few, if any, U.S. jobs. Imports from Asia, Latin America and elsewhere, he said, would replace the Chinese products shut out from the U.S. market.

The Schumer-Graham legislation began attracting a good deal of notice after it gained 67 votes — a veto-proof two-thirds of the Senate — on a test vote this year.

After that, the administration took a tougher line, saying China had taken all the steps necessary and could move immediately to a more flexible currency system.

Mr. Snow has said if China does not act by October, the administration probably would brand it a “currency manipulator” in a report sent twice a year to Congress on currency practices.

Chinese officials insist they must take more steps so their financial system can withstand the volatility that such a change would bring.

Most experts think China will not move to a free-floating currency, in which the value is set by financial markets. Instead, they predict an interim step, such as linking the yuan to a marketbasket of currencies.