By Bernie Becker and Vicki Needham - 12/27/11 10:31 PM EST
The Treasury Department on Tuesday declined to name China a currency manipulator — a label that lawmakers in both parties want slapped on Beijing.
In a semi-annual report released Tuesday, Treasury reiterated that China needs to be more flexible in appreciating the yuan.
But the department also said that, when compared to the dollar, the yuan had appreciated nearly 12 percent since last June — and almost 40 percent since China started reforming the renminbi in 2005.
“It is in China's interest to allow the exchange rate to continue to appreciate, both against the dollar and against the currencies of its other major trading partners,” the Treasury report said.
“A lack of continued appreciation by China would prevent the exchange rate from serving as a tool to encourage consumption so as to maintain strong, sustainable growth, further complicate the adjustment needed for broader financial sector reform, and undermine China's stated goal of strengthening domestic demand.”
Treasury had delayed its latest report in an effort to use several global summits to convince China to move along faster.
"China’s currency is still enormously undervalued — that fact is clear despite the Treasury report," said Scott Paul, the executive director of the Alliance for American Manufacturing, a partnership between labor and manufacturing.
"I’m disappointed that President Obama has now formally refused to cite China six times for its currency manipulation, a practice that has contributed to the loss of hundreds of thousands of American manufacturing jobs," Paul said in a statement. "The House of Representatives should pass currency legislation as soon as it returns in January."
Even though the House passed legislation on the matter last year, top Republicans in that chamber don’t appear inclined to bring up a China currency bill. The three top members of the House GOP leadership — Speaker John Boehner (R-Ohio), Majority Leader Eric Cantor (R-Va.) and Majority Whip Kevin McCarthy (R-Calif.) — all voted against the 2010 currency bill.
Still, House leaders from both parties — including the chairman, Rep. Dave Camp (R-Mich.), and ranking member, Rep. Sandy Levin (D-Mich.), of the Ways and Means Committee — have urged U.S. officials to press China's government to let its currency appreciate at a faster rate.
Mitt Romney, the former Massachusetts governor and the front-runner for the GOP’s 2012 presidential nomination, has also called for taking on China’s currency practices, and the Senate’s currency bill united lawmakers that don’t often find common ground, such as Sens. Charles Schumer (D-N.Y.) and Jeff Sessions (R-Ala.).
Critics of China’s currency policy say that, by keeping the yuan artificially low, Beijing is able to make their exports cheaper — and thus more desirable. On the flip side, American exports become more expensive in China, which can help exacerbate the trade gap between the two countries.
But undervalued currency also is just one of many issues lawmakers and the administration are concerned about when it comes to the U.S.-China relationship.
President Obama made clear during his latest trip through the Pacific Rim last month that the United States would move forward on trade deals and other global business beneficial to U.S. firms — with or without China.
Several U.S. business groups have urged caution in passing legislation or pressing China too hard for fear of retaliation on exports.
For instance, the Club for Growth, the prominent free-market group, has warned that the Senate legislation could start a trade war, and lead to higher taxes in the United States.