March 23, 2006

US senators repeat call for China to move on yuan

By Jason Subler

BEIJING (Reuters) - Two U.S. senators pressing China to
loosen currency controls repeated their message in Beijing on
Thursday, but an official Chinese newspaper said their visit
had little chance of effecting change.

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 exports to the United
States unless Beijing lets the yuan rise significantly against
the dollar.

"You ask us, well what about our legislation?," Schumer
told a news briefing.

"Well, the jury is still out. We need some concrete signs
of movement. It doesn't have to be the way that we propose,
we've always said that. But we need to know over a discrete and
reasonable period of time that the goal of having the Chinese
currency float and market forces control it ... should occur."

But in an editorial on Thursday, the official China Daily
said: "It is unlikely that the differences will be settled
during the visit of the two senators."

"But it is a good opportunity for the Chinese hosts to say
this again: U.S. restrictions on some high-tech imports to
China are unnecessary. Lifting these restrictions would greatly
help American exporters no matter how one calculates the trade

The Bush administration opposes the Schumer-Graham bill,
but it could go to a vote by March 31 -- weeks 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.

China maintains that it is doing what it can to effect
greater flexibility in the yuan, but that it needs to proceed
cautiously to avoid shocks to its economy and fragile banking

The central bank reiterated in a statement on Thursday that
it would keep the yuan's exchange rate basically stable, while
pushing ahead with plans to allow for further flexibility.

A spokesman for China's Foreign Ministry said on Thursday
that confrontation was not the way to change Chinese currency

"They should be addressed with a positive attitude, which
is to resolve them through equal negotiations, not by imposing
pressure or politicizing and exacerbating them," spokesman Qin
Gang said of economic disputes with the United States.

The yuan closed at 8.0277 against the dollar on Thursday,
meaning it has now appreciated about 1 percent since last
July's 2.1 percent revaluation and shift to a managed float.

The yuan's gains against the dollar have quickened in
recent weeks, and it reached its strongest level against the
dollar on March 20, at 8.0232.

The two senators, along with Oklahoma Republican Tom
Coburn, met Foreign Minister Li Zhaoxing on Tuesday and central
bank governor Zhou Xiaochuan on Wednesday.