US may label China a currency manipulator

I / Beijing March 24, 2010, 16:35 IST

The US Treasury Department is likely to label China as a currency manipulator in a report due in mid-April, but the move would be "more symbolic than substantive", former US trade representative Susan Schwab said.

"There is a high possibility definitely (that China will be labelled as a manipulator), but it is very important to remember that the decision is largely symbolic and does not force any action, other than consultations," the China Daily quoted Schwab as saying today.

By declaring China a currency manipulator, the US could slap additional tariffs on imports from that country, the daily said. If Washington goes ahead with the move, it will be the first time in 16 years.

Schwab, who served as US trade representative between 2006 and 2009 said, "a significant growing number" of Democrats are increasingly pushing protectionist solutions, which she said was unfortunate. "This is a very difficult decision (for the US government) to make," she said.

Democrats and Republicans in the US Senate have urged the Obama administration to label China a currency manipulator. Law makers from both the parties in the Senate also demand Washington to force Beijing to revalue the yuan.

Last week, China sent a team led by vice-minister of commerce to the US, seeking consultations and negotiations on trade-related issues.

"There is a little room and time to convince the US that China is not a currency manipulator," said Huo Jianguo, dean of the Trade Research Institute, affiliated to the commerce ministry, adding "Obama would probably give the nod to the move if only to win over voters."

The unemployment rate in the US has been around 10 per cent since the onset of the global financial crisis and is expected to stay at the same level in coming months. Obama vowed recently to create more jobs and double exports in five years, he said.

As the mid-term election campaign looms, the Obama administration could "easily make China a scapegoat by blaming the country for their own problems," Huo said, adding "the US will have to take China's response into account."

Chinese commerce minister Chen Deming on Sunday said Beijing "would respond if this (the labelling threat) means litigation" under the WTO framework. China's huge trade surplus, more than 70 per cent of which is with the US, has been declining since October.

Premier Wen Jiabao has said China will probably record a deficit of $8 billion in March. China will make efforts to import more from the US to balance trade, Wen said.