March 21, 2006

Senators Say Yuan Move Would Help China and U.S

BEIJING (Reuters) - U.S. senators threatening China with sanctions unless it revalues its yuan said on Wednesday that letting the currency float would solve problems in both countries.

Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, are authors of a bill that threatens China with a 27.5 percent tariff on its exports to the United States unless Beijing agrees to revalue its yuan currency at a higher exchange rate to the dollar.

"We have been made aware of the problems here in China, we're well aware of the problems in America, and we do believe that letting the currency float will help solve the problems -- one country needing more consumption and one country needing more investment and production," Schumer told reporters.

The senators, along with Oklahoma Republican Tom Coburn, met Foreign Minister Li Zhaoxing on Tuesday and were to hold talks with central bank governor Zhou Xiaochuan and meet officials from China's top economic planning body, the National Development and Reform Commission, on Wednesday.

The Bush administration opposes the Schumer/Graham bill, but it could go to a vote by March 31 -- less than a month before China's Hu Jintao makes his first trip to Washington as president.

Many U.S. lawmakers and manufacturers believe the yuan is undervalued, giving China's exports an unfair advantage that has cost millions of American jobs and fueled a bilateral trade gap that hit a record $202 billion last year.

"What we're trying to look for is a process that is not responding to political pressures, but one that is responding to economic reality, because I do believe ... that it's in the best interest of the Chinese people to allow a market-based currency," said Graham.

The senators were not looking for a timetable or specific goal, Schumer said, but wanted to be convinced that China is moving in its own way toward letting the currency float.

He said he was not convinced that was happening.

The Senate Finance Committee is also working on a bill aimed at addressing trade irritants with China as an alternative to the Schumer/Graham initiative, but there were no details of the legislation.