Commerce Secretary: Chinese yuan still undervalued despite decision to let currency appreciate

Commerce Secretary: China currency undervalued

WASHINGTON — Despite China’s decision to let its currency appreciate against the dollar, the yuan is still undervalued, hurting American exports, Commerce Secretary Gary Locke said Wednesday.

President Barack Obama will raise currency and other trade issues in talks with Chinese officials at a G-20 summit of wealthy and developing nations in Canada this weekend, Locke said at a Senate Finance Committee hearing.

Some U.S. lawmakers have pushed for Obama to have China declared a currency manipulator, a designation that could lead to trade sanctions. The Treasury Department postponed issuing a report to Congress due in April that could have put the label on Beijing.

China’s move to loosen its currency exchange was expected to ease U.S. concerns in the run-up to this weekend’s summit. Yet Locke said at Wednesday’s hearing, “There’s no disagreement that the Chinese currency is undervalued.”

China announced over the weekend it would give up a two-year-old peg of its currency to the U.S. dollar, allowing the yuan to appreciate in value. Economists don’t anticipate big swings in the yuan’s value. Nevertheless, a stronger yuan would make Chinese exports more expensive and could bring relief to foreign manufacturers, including the U.S., that have struggled to compete.

Beijing has denied accusations the yuan is unfairly undervalued.

U.S. Trade Representative Ron Kirk, who also testified at Wednesday’s hearing, said China has made progress in opening its markets since joining the World Trade Organization in 2001. The U.S. exported $85 billion in goods and services to China in 2009, Kirk said, yet China still enjoys a huge trade surplus with the U.S.

Kirk said one priority is to address recent proposals by China’s government that could discriminate against U.S. software, computer and clean energy companies. The proposed policies, known as “indigenous innovation,” are intended to encourage more technological development within the China’s borders.

Members of Congress have complained for years that China undervalues its currency to make its exports cheaper, driving up the cost of American imports and adding to the U.S. trade deficit. On Wednesday, several senators questioned whether China was serious about letting value of the yuan appreciate by more than a token amount.

“The only purpose (of the announcement) is to fend off pressure,” said Sen. Chuck Schumer, D-N.Y. “It’s the same pattern we have seen for years.”

Schumer noted that the value of the yuan increased only slightly against the dollar Monday, and the value of the yuan actually fell Tuesday. Schumer said he will continue pushing a bill that would punish China for its currency policies.

The Obama administration must do more to force China to open it’s markets to U.S. goods, said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.

“China continues to erect barriers to U.S. exports,” Baucus said at the hearing. “China infringes U.S. intellectual property at unacceptable rates. China discriminates against U.S. companies through its so-called “indigenous innovation” policies. China dumps many of its products on the U.S. market.”