20101001 China warns US that bill could seriously affect ties

China warns US that bill could seriously affect ties

Reuters, BEIJING
　

A worker checks the authenticity of a yuan note at a restaurant in Hefei, China, yesterday.
PHOTO: REUTERS
　

China yesterday warned that a US House of Representatives bill to penalize it for not letting the yuan rise faster could seriously affect bilateral ties.

In a relatively measured response, Chinese Foreign Ministry spokeswoman Jiang Yu (姜瑜) said Congress should avoid steps that could harm relations, saying Beijing was “resolutely opposed” to the bill, but she declined to say whether China would retaliate.

The US House of Representatives bill, which many analysts say is unlikely to become law, is aimed at pressuring Beijing to let its currency rise faster by branding it in violation of world trade rules.

“Using the renminbi [yuan] exchange rate issue as an excuse to engage in trade protectionism against China can only harm China-US trade and economic relations, and will have a negative effect on both countries’ economies and the world economy,” Jiang told a regular press briefing. “We urge the members of the US Congress to understand clearly the importance of China-US trade and economic relations, and put a halt to protectionism, so as to avoid hurting the interests of the peoples of the two countries and of the world.”

Whether China would take any US law on the yuan to the WTO was “hypothetical,” she said.

The bill would need to be passed by the Senate — far from certain and not likely until after congressional elections on Nov. 2 when the US political landscape could be greatly changed — and signed by US President Barack Obama to become law.

China’s tight leash on the yuan is under intense scrutiny as countries around the world look to export their way back to economic health, raising concerns they will intentionally weaken their currencies to gain an edge.

The bill allows the US Commerce Department to treat “fundamentally undervalued currencies” as an illegal export subsidy so that US companies can request a countervailing duty to offset China’s price advantage.

Earlier in the day, Xinhua news agency quoted Chinese Commerce Ministry spokesman, Yao Jian (姚堅), as saying: “Starting a countervailing investigation in the name of exchange rates does not conform with relevant WTO rules.”
That lawyer-like statement was relatively moderate compared with China’s reaction to other disputes this year, including US weapons sales to Taiwan, when Beijing froze military contacts with the US.

The American Chamber of Commerce in China voiced its opposition to the Chinese currency legislation in an e-mail, saying: “If enacted into law, the chamber does not believe the bill will be effective in achieving its objectives and would fail to create significant US job growth.”

China’s central bank fixed the yuan’s daily mid-point versus the US dollar at a weaker level yesterday.

Despite the weaker mid-point, the yuan has now gained almost 2.2 percent against the US dollar since Beijing scrapped a 23-month-old peg to the greenback on June 19 and said it would let the currency resume a managed float. Nearly all of the increase occurred last month.

The bill could fan the flames of a long-running dispute with China over trade and jobs.

It passed with solid bipartisan support just over a month ahead of mid-term elections, as voters focus on the still-struggling US economy and persistently high unemployment.

Chinese analysts were skeptical that the legislation would produce any quick movement on the yuan.

“If you are looking for another one-off revaluation of 3 to 5 percent, or are expecting a 20 percent rise in the yuan over a year ... forget it,” said Fu Bingtao (付兵濤), an economist with Agricultural Bank of China.