June 17, 2010 2:13 am

Lawmaker warns of US law on renminbi

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A senior US lawmaker on Wednesday stepped up warnings to China against holding down its exchange rate, threatening to resort to legislation if Beijing did not change currency policy by next week’s meeting of the Group of 20 big economies.


“Seven years of patience from the United States and the international community have run out,” said Sander Levin, chairman of the House of Representatives ways and means committee.

“The administration constructively set the G20 meeting as an important juncture for China to change its inflexible currency practices. If China does not act and the administration does not respond promptly thereafter, the Congress will act.” G20 heads of government meet in Toronto at the end of next week.

Mr Levin, a Democrat from the industrial heartland of Michigan, has long been a critic of China’s policy of holding down the renminbi to boost exports. But until now he has generally been a voice of caution against legislation to try to force Beijing to act.

Last week, Tim Geithner, US Treasury secretary, also shifted the tone of his comments, saying Beijing should take note of the widespread anger on Capitol Hill.

China hit back over the weekend. A commentary in the official Xinhua news agency said: “These congressmen claim they are the white knights defending the interests of the American people, but in fact, they are nothing more than a bunch of baby-kissing politicians trying to swing voters by manipulating the [renminbi] debate.”

On Wednesday a senior Chinese government official said: “They [the US] themselves issue the major international reserve currency. What they are doing with their own currency will affect the global economy much more than anything else.”

Charles Schumer, the third most senior Democrat in the Senate, has proposed a bill that would allow US businesses to incorporate estimates of currency undervaluation in the “countervailing duties” they can impose on imports deemed to be unfairly subsidised. The bill, being less likely to trigger an all-out trade war than Mr Schumer’s earlier plan for an across-the-board 27.5 per cent tariff on Chinese imports, is less likely to be blocked by the White House.

At hearings by Mr Levin’s committee on Wednesday, business leaders complained that Beijing tilted the playing field in favour of its companies in various ways, and some warned against blanket solutions such as currency legislation.

US businesses have complained about the “indigenous innovation” policy designed to encourage Chinese businesses, which they say is used to skew government procurement to domestic companies and encourages them to ignore intellectual property rights.

John Frisbie, president of the US-China Business Council, an association of companies trading and operating in China, said that persistent lobbying across a range of fronts was the best way forward.

“US companies want to see the problems addressed with specific solutions, not sanctions or legislation that would disrupt the relationship,” he said.

Republicans on the committee have also warned against Mr Schumer’s bill, saying it is of dubious legality under the rules of the World Trade Organisation and risks a backlash.

China is due to make a fresh bid next month to join the government procurement agreement of the WTO, a plurilateral deal that allows signatories to bid for each others’ publicly funded contracts.

Additional reporting by Geoff Dyer in Beijing

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