Treasury: China not manipulating currency

The Treasury Department on Friday once again declined to name China a currency manipulator despite bipartisan calls for action from Congress.

Treasury noted that China's currency has appreciated against the dollar since June 2010, and said it did not meet the definition of a currency manipulator under its standards. 

The finding is in a semi-annual report on international economic and exchange rate policies released Friday. Treasury under President Obama and President George W. Bush has never found that China is a currency manipulator despite consistent pressure over the years.

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Critics say the Chinese renminbi (RMB) is undervalued, making American exports less competitive and contributing to an almost $300 billion trade deficit with China last year. 

Republican presidential Mitt Romney has vowed to name China a currency manipulator on his first day in office, and his campaign criticized Obama for trying to hide Treasury's decision by releasing it the Friday before Memorial Day weekend, when both the House and Senate are in recess. The report was due April 15.

"For American businesses and workers who want to compete on a level playing field in the international economy, the choice has never been clearer," Romney for President Policy Director Lanhee Chen said in a statement.

Sen. Charles Schumer (D-N.Y.), who has been sponsored legislation that would punish Chinese imports for the undervalued currency, also criticized the administration's report.

“The administration continues to let China get away with flouting trade rules just for the sake of diplomacy. Calling out China as a manipulator may be awkward, but it is time to take off the kid glove," he said in a statement.  “With the administration continuing to balk on this, it’s up to Congress to act. The Senate has passed bipartisan legislation to confront China and stand up for American workers, and Speaker Boehner needs to stop sitting on it and give it a vote.”

Sen. Rob Portman (R-Ohio), who is being talked about as possible Romney vice president, also took issue with the report.

"I am concerned by the Administration's determination that China is not manipulating its currency when the facts show otherwise," he said. "The Administration should be working to level the playing field for American workers, farmers and businesses, including taking stronger measures to stop China currency manipulation which unfairly increases the cost of our exports to China and decreases the costs of their exports to the United States.”

The Senate last year passed bipartisan legislation from Sen. Sherrod Brown (D-Ohio) that would enhance oversight of currency exchange rates.

“Once again, the U.S. Treasury Department has given China a free pass when it comes to its currency manipulation,” Brown said in a statement in which he called on the House to bring up his currency manipulation bill. “While we’re seeing American manufacturing rebound, China is stepping up its efforts in a number of critical sectors, including clean and solar energy, advanced manufacturing, and auto parts."

Treasury said it would continue to monitor China's currency, which it said remained undervalued. 

“Based on the appreciation of the RMB against the dollar since June 2010, the decline in China’s current account surplus, and China’s commitments in the G-20 and the U.S.-China Strategic & Economic Dialogue to move more rapidly to a more market-determined exchange rate system, Treasury has concluded that the standards identified in Section 3004 of the Act during the period covered in this Report have not been met with respect to China,” Treasury  said in a statement.

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“Nonetheless, the available evidence suggest the RMB remains significantly undervalued, and we believe further appreciation of the RMB against the dollar and other major currencies is warranted. Treasury will continue to closely monitor the pace of RMB appreciation and press for policy changes that yield greater exchange rate flexibility, a level playing field, and a sustained shift to domestic demand-led growth.”

Some critics say the U.S. trade deficit is caused by structural problems with the U.S. economy more than with China's currency. The United States suffers from "currency fixation syndrome” but has trade deficits with 87 other countries, Yale University senior fellow Stephen Roach testified at a Senate banking panel hearing this week.

The United States could not unilaterally retaliate against China even if it did label it a currency manipulator, now that China has joined the World Trade Organization. Still, doing so would inevitably create friction in the two countries' relationship.

— Erik Wasson contributed

This story was last updated at 1:12 p.m.