The Obama administration said Tuesday that China is making headway on its currency-valuation policies and should not be deemed a currency manipulator — fighting back against top Senate Democrats who had demanded President Obama sanction the U.S.'s top economic competitor.
The Treasury Department said that while China's currency is still undervalued, the "misalignment has narrowed over the course of the past 18 months."
"Based on the ongoing appreciation of the renminbi against the dollar since June 2010, the decline in China's current-account surplus, and China's commitments at the [Group of 20] and the U.S.-China Strategic and Economic Dialogue (S&ED) asserting that it will continue to promote faster RMB exchange-rate flexibility, Treasury has concluded that the standards [for naming a country a currency manipulator] identified in Section 3004 of the [1988 Trade and Competitiveness Act] during the period covered in this report have not been met with respect to China," the department said in a report to Congress on the law's somewhat-technical requirements.
Manufacturing groups decried the report.
"China's currency is still enormously undervalued — that fact is clear, despite the Treasury report," said Scott Paul, executive director of the Alliance for American Manufacturing. "I'm disappointed that President Obama has now formally refused to cite China six times for its currency manipulation, a practice which has contributed to the loss of hundreds of thousands of American manufacturing jobs."
Earlier this fall, the Democrat-led Senate passed a bill that would push the administration to declare China a currency manipulator, which would trigger automatic penalties.
At the time, top Democrats, including Senate Majority Leader Harry Reid, called their legislation a jobs bill.
The measure was sponsored by a bipartisan coalition, and passed the Senate 63-35.
But the Republican-led House bottled the bill up, saying it wanted to see the White House take a position. The administration has been reticent to do that, saying it feared action would spark a trade war.
Tuesday's report, released while Mr. Obama is vacationing in Hawaii, signals the administration has not changed its attitude and likely means the China-currency legislation is moribund in Congress.
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