He pledged to make China’s exchange rate a “significant focus” of the next Group of 20 economic powers meeting in Seoul in November.
Members of the Senate committee also pledged to draft legislation giving the administration more “leverage” to force changes in Chinese policies.
Chairman Christopher J. Dodd, Connecticut Democrat, said he wants to work with the Treasury to put teeth into a law that currently requires Treasury only to try to negotiate changes with China and other countries that manipulate their currencies. Treasury has been doing so for years, with little to show for it.
Legislators appear to be hoping for a repeat of their experience in 2005, when the threat of passing punitive legislation prompted China to speed the rise of the yuan.
Between 2005 and 2008, it gained 21 percent in value. But China stopped allowing appreciation for nearly two years during the global financial crisis to protect its export industries.
Already in the 10 days leading up to this week’s hearings, China allowed a rapid appreciation of 1 percent, bringing the total gain to 1.5 percent since China reinstituted its more flexible currency regime in June.
“This currency manipulation is like a boot on the throat of our economy,” he said.
The condemnation of Chinese trade practices went across party lines, though Republicans were more apt to warn of the risks of setting off a trade war. Mr. Dodd called China’s currency policies “egregious.”
“There’s no question that the economic and trade policies of China represent clear roadblocks to our recovery,” he said. “China does basically whatever it wants, while we grow weaker and they grow stronger.”
China maintained strong growth even while the United States and other developed countries were in recession in the past three years, enabling the Asian giant to become the second largest economy in the world this spring. That spot had been long held by Japan.
Sen. Richard C. Shelby, Alabama Republican, questioned why the Obama administration, like the Bush administration before it, has refused to label China as a currency “manipulator” and take action against it.
“There is no question that China manipulates its currency to subsidize its exports,” Mr. Shelby said. But Mr. Geithner said the current law requiring consultations with China is toothless and has the power to “change nothing.”
“It may be time for new legislation to ensure that Treasury looks out for American workers, not Chinese creditors,” Mr. Shelby said, referring to China’s role as the largest buyer of U.S. Treasury bonds.View Entire Story
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