China’s central bank and ministries of commerce and foreign affairs released separate statements criticizing the bill, which is being championed by Democratic lawmakers who hope to protect U.S. jobs by slapping tariffs on Chinese imports.
Such a move “seriously violates rules of the World Trade Organization and obstructs China-U.S. trade ties,” said Foreign Ministry spokesman Ma Zhaoxu in a statement posted on the Chinese government’s official website.
China’s central bank said the attention given to China’s currency, known as the yuan or renmenbi, deflects Washington from the real issues plaguing the American economy.
“The yuan bill passed by the U.S. Senate will not solve its problems, such as insufficient savings, high trade deficit and high unemployment rate, but it may seriously affect the whole progress of China's reform of its yuan exchange rate regime and may also lead to a trade war, which we would not like to see,” the bank said on its website, according to a translation by Reuters.
The yuan’s value is set daily by China’s central bank, not by free markets. Critics of China’s currency policy contend the yuan is undervalued by as much as 40% to give the world’s second-largest economy an unfair trade advantage.
Labor advocacy groups in the U.S. such as the Economic Policy Institute say this has fueled a trade deficit with China that has cost Americans 2.8 million jobs between 2001 and 2010.
Debate still rages over whether targeting China’s currency will return jobs to the U.S., as manufacturing could shift to another low wage country such as Vietnam.
The yuan has edged up about 10% against the dollar since it was de-pegged from the greenback in June, 2010. Experts say the central bank is in favor of faster appreciation to combat inflation, which is running at a three-year high. A stronger yuan would make imports cheaper.
But the Ministry of Commerce, which oversees trade, and officials in coastal manufacturing provinces are against more aggressive appreciation for fear it will bankrupt factories, sap taxes and leave millions out of work.
-- David Pierson
Photo: China blasted a proposed U.S. law that would slap tariffs on countries that undervalued their currency. Above, a bank clerk counts notes. Credit: Zhong Min / EPA