Currency Report Clears China

The U.S. Treasury on Monday declined to designate China a currency manipulator despite the demands of many U.S. lawmakers but served notice that it would keep pressuring Beijing to let its currency rise in value.

An intently awaited Treasury report on currency practices found that no country was gaining an unfair trading edge by keeping its currency artificially low. The report also said China’s decision in July to drop a peg between its currency -- called the yuan -- and the dollar played a role in the Treasury’s assessment.

“The initial steps by China to increase its exchange rate flexibility played an important part in this decision,” Treasury Secretary John W. Snow said in a statement accompanying the 31-page report to Congress.

“But it is also contingent on further progress to incorporate flexibility reflecting underlying market forces in China’s [yuan] exchange rate by the time of the next foreign exchange report,” he added.

In May, the Treasury said China might be named a currency manipulator, opening it to trade sanctions, unless Beijing amended its policies before Monday’s report was issued.

Since then, Beijing has dropped the yuan peg, and Snow and President Bush have visited China and urged it to speed up the process of letting market forces determine the yuan’s value. The report was due in mid-October but was delayed because of the official visits.

U.S. producers say the yuan is undervalued by 25% to 40%, making China’s goods cheaper in America’s booming consumer markets and costing hundreds of thousands of American jobs.

“We’re very disappointed frankly that Treasury didn’t cite them,” said Patricia Mears, a director at the National Assn. of Manufacturers.