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Pressure increases for China to adjust currency

Article-Pressure increases for China to adjust currency

The activity level within Washington, D.C. continues to pick up regarding China's alleged role as a currency manipulator and the imbalance it causes in world trade and the overall economies of other nations, particularly the United States. Some economists estimate that the Chinese currency could be undervalued by as much as 40%.

On April 3, 2010, the Obama administration said it would delay a decision on whether to formally declare China a currency manipulator, but also said it would press Chinese leaders regarding this issue during a series of meetings in May and June. The move was seen as sending messages to both China and the U.S. congress

There was a semi-annual report due on April 15 from the Treasury Department to congress that identifies currency manipulators. It was deferred. If a country is named in that report it opens the door to compensatory action such as tariffs.

The delay allows negotiation to take place at a meeting of finance ministers and central bank governors of the Group of 20 nations later in April; the annual U.S.-China Strategic and Economic Dialogue in China in May; and another G-20 meeting, this time of leaders and finance ministers in June.

In addition, as tensions between China and the U.S. have relaxed a bit recently, China announced that President Hu Jintao will be attending a nuclear security summit meeting in Washington in April, during which the subject could also be discussed.

Some observers think China may move on its own to adjust the value of the renmimbi, also known as the yuan. This delay gives the Chinese time to consider and possibly to do that. There have been some recent reports that some well-known Chinese business leaders have spoken in favor of a revaluation of the currency, which removes some of the decision-making burden from government officials.

There is also legislation due to come before Congress within the next two months aimed at compelling the administration to take action if the currency misalignment continues. The legislation is co-sponsored by Sen. Lindsay Graham (R-SC) and Charles Shumer (D-NY), with support from several other senators. 

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