News & Analysis

The hot-button Chinese currency issue hit a fever pitch this week

The hot-button Chinese currency issue hit a fever pitch this week ahead of next month's semi-annual US Treasury report that could see China formally labeled a currency manipulator. Bipartisan support quickly fell in behind Senator Schumer, who said he would reintroduce legislation to confront China on currency late last week. A group of 130 members of the House sent a letter to Treasury Secretary Geithner urging him to name China a currency manipulator. The Treasury response was measured, calling the currency concerns significant and warranting review of Senate proposal, though Geithner told one interview the Treasury does not believe China is a currency manipulator. The IMF's Strauss-Kahn also chimed in on the debate, suggesting the Yuan is "much undervalued." Later in the week, China Commerce Ministry called US currency demands unfair and harmful to China-US trade concerns, echoing weekend commentary from Premier Wen rejecting the notion that renminbi is undervalued. Conflicting opinions were heard from other quarters: Morgan Stanley's Steven Roach said calls for a strong yuan is "very bad advice," while noted US Economist Joseph Stiglitz said yuan appreciation would not fully resolve trade imbalances and could affect China's demand for US Treasuries.