Congress to prod China on yuan

From combined dispatches

Congress will pass a measure to prod China to raise the value of its currency after the U.S. Treasury’s refusal to label the export powerhouse a currency manipulator, House Speaker Nancy Pelosi predicted.

Mrs. Pelosi, California Democrat, said yesterday that she has been warning about the U.S. trade deficit with China for the past 17 years and now the impact on U.S. manufacturers from the weak yuan is attracting the attention of her colleagues.

“Congress will step in,” Mrs. Pelosi said in an interview on Bloomberg Television’s “Political Capital With Al Hunt.”

Lawmakers have proposed a variety of pieces of legislation to address China’s trade surplus with the U.S., which surged to a record $232.5 billion in 2006.

The speaker commented after China appealed to U.S. lawmakers yesterday not to politicize a currency dispute or resort to pressure after four senators announced legislation to penalize Beijing.

Foreign Ministry spokesman Qin Gang called on Washington to recognize that Beijing is making progress in easing controls that critics say keep its currency undervalued and add to a swollen Chinese trade surplus.

“We hope the U.S. senators can view the importance of the healthy development of China-U.S. economic relations from a strategic perspective, properly handle the frictions in our economic ties and trade between the two sides, not politicize the economic issue and not solve the issue by exerting pressure,” Mr. Qin said.

Sens. Charles E. Schumer, New York Democrat, and Lindsey Graham, South Carolina Republican, said Wednesday they were introducing legislation to penalize countries with a “fundamentally misaligned currency.” It would allow tariffs and other punitive measures against violators.

Senate Banking Committee Chairman Christopher J. Dodd, Connecticut Democrat, and Sen. Richard C. Shelby, Alabama Republican, said they were introducing a measure that would direct the U.S. government to pursue currency cases before the International Monetary Fund and World Trade Organization.

China revalued the yuan by 2.1 percent against the dollar in July 2005 and has allowed it to rise by about 5.7 percent in tightly controlled trading since then. But the United States and other trading partners have been pressing for faster action.

“The reform will go on,” Mr. Qin said at a regular press briefing.

“As for the direction for the future reform, it shall better reflect the demand and supply of the market,” he said. “We hope the United States can recognize this point in a just manner.”