US toughens warnings on China’s currency stand

The United States toughened its warning on China Thursday for 'lack
of flexibility' of its yuan currency and for rapidly building up its
foreign reserves, but stopped short of branding Beijing a currency
manipulator.    'Both the rigidity of the renminbi and the
reacceleration of reserve accumulation are serious concerns which
should be corrected to help ensure a stronger, more balanced global
economy,' the US Treasury said.    The Treasury's statement came in
its semiannual report to Congress under a law requiring it to
determine whether any foreign economy manipulates its currency
against the US dollar.    US lawmakers and several industry groups
have accused China for years of artificially weakening the value of
the yuan, or renminbi, to boost its export competitiveness.    The
yuan, which has depreciated 6.9 per cent against the dollar since
February 2009, remains ' undervalued,' the Treasury report said.
China's foreign exchange reserves, already the world's largest, jumped
nearly 20 per cent from a year ago to a record 2.27 trillion dollars
at the end of September, the Chinese central bank said Wednesday.
The language in the Treasury report appeared stronger than in a first
report sent by President Barack Obama's administration to lawmakers
in April, three months after he entered the White House.    Treasury
Secretary Timothy Geithner had set off alarms in Beijing when he
charged during his January Senate confirmation hearing that the
president believed China manipulated its currency.    Officials later
played down the written statement, saying staff who prepared it had
recycled election campaign speeches.    Obama came into office
promising to talk tough with China on a range of issues, including
congressional complaints that China's manipulation of the yuan was
fueling the US trade deficit with the Asian giant.    Thursday's
Treasury report said 'no major trading partner of the United States
met the standards' for branding them a currency manipulator for
gaining unfair competitive advantage in international trade.    While
14 of 17 currencies studied appreciated against the dollar in the
second quarter of 2009, only the Chinese renminbi remained unchanged
against the dollar, the report found.    'This lack of movement of the
renminbi has contributed to upward pressure on more flexible
currencies in the region,' it said, noting that ' several emerging
markets' in Asia had intervened in the market to slow the pace of
appreciation.    China's overall policies played an important role in
anchoring the global economy in 2009 and promoting a reduction in its
current account surplus, the Treasury said.    But it noted that the
recent 'lack of flexibility' of the yuan exchange rate and China's
reserves buildup 'risk unwinding some of the progress made in
reducing' global imbalances as the world confronts an economic
crisis.    The development was critical as governments prepare to
withdraw stimulus policies and demand by China's trading partners
recovered, according to the report.    China has invested a large
part of the reserves in US dollar assets, such as safe but
low-yielding US Treasury bonds, but Beijing has tried to diversify
its investments to improve its returns in the midst of the financial
crisis.