March 21, 2006
Senators seek “pattern of progress” on yuan
By Lindsay Beck and Jason Subler
BEIJING (Reuters) - A U.S. senator threatening sanctions
unless China revalues the yuan said on Tuesday he wanted to
learn whether there was "a pattern of progress" in the
currency's quickening rate of climb.
Lindsey Graham, a South Carolina Republican, of a bill that
would impose a tariff of 27.5 percent on Chinese imports into
the United States unless Beijing revalues the yuan "at or near
its fair market value."
"We are not here to dictate specific markers...We want to
see if there has been a pattern of progress," Schumer told
reporters at the start of a fact-finding trip.
Schumer and Graham are holding talks to decide whether to
go ahead with a vote on their bill by March 31.
Asked what China should do regards its currency, Schumer
said: "Our goal is for China to move on their own... There are
no magic words.
"It's a delicate game. The Chinese are very sensitive to
being pressured into things. We are waiting and seeing. It's
premature to give any impressions."
The two law-makers, accompanied by Oklahoma Republican Tom
Coburn, met Chinese Foreign Minister Li Zhaoxing on Tuesday,
who briefed them on China's exchange rate policies.
Schumer said Li also spoke a lot about Taiwan, which China
considers a breakaway province.
"He said frictions should be resolved on the basis of
cooperation through negotiation," Foreign Ministry spokesman
Qin Gang said, referring to Li. "We should not politicize these
issues and magnify them," Qin told a news conference.
But Coburn said was not convinced the Chinese took their
"I heard nothing to make me think that they have a full
understanding of the serious nature that the Congress considers
currency manipulation," he told reporters.
The senators were expected to meet central bank governor
Zhou Xiaochuan and Commerce Minister Bo Xilai later in the
The yuan slipped a touch on Tuesday to 8.0274 per dollar
after hitting 8.0232 per dollar on Monday. That was the highest
level since Beijing revalued the yuan by 2.1 percent on July 21
and freed it from a dollar peg to float within managed bands.
The yuan has now gained 1.03 percent since the revaluation.
The senators contend the yuan is deliberately undervalued
by 15 percent to 40 percent, handing Chinese exporters an
unfair advantage that is bloating the $202 billion U.S. trade
deficit and destroying millions of American manufacturing jobs.
Premier Wen Jiabao last week ruled out another one-off
revaluation but said China would gradually permit greater
movement in the exchange rate.
ON THE WAY UP
Sure enough, the yuan has risen at a 3.5 percent annual
pace over the past four weeks, a movement driven not just by
U.S. political factors but also by China's economic
fundamentals, said Jonathan Anderson, chief Asian economist
with UBS in Hong Kong.
"We believe dollar/yuan could trade below the key
psychological level of 8.00 within the next few weeks," he said
in a note to clients.
The Schumer-Graham bill is not new but, with President Hu
Jintao due to visit the United States next month, the measure
has become a lightning rod for U.S. unease over the speed of
China's economic rise.
"My goal is to sell the idea that stability is best
achieved when everyone plays by the same rules," Graham said.
The bill is opposed by President George W. Bush and by many
in the U.S. business community. For one thing, they say, the
measure would flout World Trade Organization rules.
But Stephen Roach, Morgan Stanley's chief economist, urged
Bejing not to treat the Schumer/Graham initiative as
run-of-the-mill political pressure.
He said it was a question of when, not if, the bill was put
to a vote in the Senate, which was likely to approve it by a
"History tells us that protectionism is a very dangerous
development because it leads to counterreactions from those who
are adversely affected. And that's a very slippery slope for
the world to go down," Roach told a news conference in Beijing.
(Additional reporting by Ben Blanchard)