On an issue that dogged President Obama during his re-election campaign, the Treasury Department said Tuesday that China's currency remains undervalued, but the administration stopped short of branding the country a currency manipulator.
In its semi-annual report to Congress on international exchange rates, Treasury said Chinese officials "have substantially reduced the level of official intervention in exchange markets" since last year, and have "taken a series of steps to liberalize controls on capital movements."
Critics including former Republican presidential candidate Mitt Romney blame China for keeping the value of its currency artificially low to help its competitiveness in trade, making its goods cheaper in overseas markets and costing American jobs. Mr. Romney said if elected, he would brand China a currency manipulator, a step towards possible trade sanctions.
A Democratic ally of the president, Sen. Robert P. Casey Jr. of Pennsylvania, blamed the administration Tuesday for not getting tough with China.
"Today's currency report by the Treasury Department makes it clear that China is still cheating on its currency and stealing American jobs," Mr. Casey said in a statement. "However, once again, the administration failed to act."
He said the news that China is "playing games with its currency" is no surprise.
"But it should serve as a call to the administration to finally label China a currency manipulator," Mr. Casey said.
"Labeling China a currency manipulator will allow Pennsylvania workers and businesses to compete on a level playing field. When China cheats on its currency, Pennsylvanians lose their jobs — it's that simple.”
Sen. Charles E. Schumer, New York Democrat and a longtime critic of China's currency practices, also blasted the administration.
"This report all but admits China’s currency is being manipulated, but stops short of saying so explicitly," Mr. Schumer said in a statement. "The formal designation matters because there can be no penalties without it. It’s time for the Obama administration to rip off the band-aid, and force China to play by the same rules as all other countries."
Treasury said the yuan, China's currency, has appreciated by 12.6 percent against the dollar when adjusted for inflation since June 2010. But the agency said the yuan "remains significantly undervalued, and further appreciation ... against the dollar and other major currencies is warranted."
The U.S. trade deficit with China in 2011 totaled $295.4 billion, about an 8-percent increase above 2010. Allowing the yuan to appreciate would make Chinese goods more expensive for American consumers, reducing U.S. imports of them.
The report was originally scheduled to be published last month but was delayed.
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