Forex Blog: Currency Trading News & Analysis.

May 9th 2005

US adopts tougher stance on Chinese Yuan

Citing the millions of jobs ‘lost’ to China, American manufacturers have clamored for the US to pressure China to float the Yuan. The US capitulated, and agreed to use diplomacy as a means of applying such pressure. Such has characterized the US approach for a couple years. Beginning last month however, it seems the US has changed tactics. First, Congress voted to threaten China with a 27.5% across-the-board tariff if the Yuan was not permitted to float, although no official timetable was included in the bill. Next, American manufacturers lobbied for China to be officially labeled a "currency manipulator." Moreover, many prominent economists and central bankers have spoken publicly, urging China to implement currency reforms. Alan Greenspan warned of rising inflation in China and widening trade imbalances. John Snow, Secretary of the Treasury, claims China has all of the necessary mechanisms in place to support a floating currency. At this point, the US could rightfully use the WTO as a means of forcing China into revaluing with the threat of heavy tariffs on all Chinese imports. The Canadian Press reports:

While the administration rejected that approach last year in favor of using diplomatic channels, Vargo said he believed U.S. officials now favor a tougher line. "The administration has made a major shift by saying the time for China to act is now," he said.

Read More: U.S. officials ditch quiet diplomacy for tougher stance on China’s currency

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Posted by Adam Kritzer | in Chinese Yuan (RMB) | No Comments »

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