Apr 15, 2013, 08.42 AM | Source: Reuters
The Obama administration said on Friday that China's currency remained "significantly undervalued," but again stopped short of labeling the world's second-biggest economy a currency manipulator.
Although Beijing controls the pace at which the yuan can rise by intervening in foreign exchange markets, the US Treasury said in a congressionally mandated semi-annual report that China did not meet the legal requirements to be deemed a currency manipulator.
The label is largely symbolic, but would require Washington to open discussions with Beijing on adjusting the yuan's value. Many US lawmakers have accused China of deliberately keeping the yuan undervalued to gain a trade advantage.
As in other reports over the last several years, the analysis on China reflected both the administration's desire to maintain good relations with its top creditor and an attempt to keep up pressure for changes in China that could benefit the US economy and mollify domestic critics.
The report, which surveys the foreign exchange practices of major U.S. trading partners, said China had allowed the yuan to rise 16.2 percent against the dollar in inflation-adjusted terms since June 2010, when China moved off its exchange rate peg.
The yuan, also known as the renminbi, hit a record high against the dollar on Friday as China's central bank fixed its official midpoint for the currency at the strongest level yet ahead of a Beijing visit by U.S. Secretary of State John Kerry.
"Nonetheless, the available evidence suggests the renminbi remains significantly undervalued, intervention appears to have resumed, and further appreciation of the renminbi against the dollar is warranted," Treasury said in a statement.
The Treasury also said it was closely monitoring policies in Japan meant to support the growth of domestic demand. Japan's aggressive monetary policy, which has sharply undercut the value of the yen, has refueled a debate about competitive devaluations. It has been more than 18 years since the U.S. Treasury has designated any country a manipulator. China was labeled a manipulator between 1992 and 1994.