Stocks jump on China currency

Stocks jump on China currency

Stocks jumped Monday on the back of China’s announcement it would make its currency’s exchange rate more flexible.
 
The announcement by China’s central bank followed intense pressure from lawmakers in the House and Senate, who warned Chinese imports could face higher tariffs if China did not allow its currency to strengthen.
 
The Dow Jones Industrial Average opened more than 100 points higher than its close on Friday, and was still trading more than 80 points higher at mid-morning. China’s currency, known as the yuan or renminbi, had strengthened by .44 percent as Asian markets closed on Monday, the most it has gained in a single day in five years.
 

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For most of the year, Sen. Charles SchumerCharles (Chuck) Ellis SchumerSchumer, Pelosi push Trump to back universal background check bill Sinema says she would back Kennedy in race against Markey Democrats threaten to withhold defense votes over wall MORE (D-N.Y.) and other Democrats have been playing the “bad cop” to the Treasury Department’s “good cop” in the ongoing currency dispute with China, which intensified as the global economy began to rise out of recession.
 
While the Obama administration pressed China to unilaterally make changes to its currency, Schumer and others repeatedly threatened to move forward with legislation, only to pull back in order to allow China more time to address the issue on its own.
 
In response to China’s announcement, Schumer and other lawmakers again threatened to move forward legislatively.
 
“We intend to move forward as quickly as possible with legislation,” Schumer told Reuters on Sunday. “It is only strong legislation that will get the Chinese to change and will stop jobs and wealth from flowing out of America as a result of unfair trade policies.’”
 
Schumer on Sunday criticized China for ruling out a one-time revaluation of its currency.
 
Schumer’s bill would allow the Commerce Department to consider a country’s currency policies in assessing anti-subsidy duties, which could lead to higher tariffs on a country found to lower the value of its currency to secure a trade advantage.
 
Lawmakers, backed by labor unions and U.S. manufacturers, argue China’s currency policy has exacerbated the U.S. trade deficit with China, which stood at $40 billion in April alone.
 
China’s move was announced in advance of this weekend’s G-20 meeting, where President Barack ObamaBarack Hussein ObamaTrump spokeswoman: Health care will be 'big' selling point for union workers Democrats will not beat Trump without moderate policy ideas Trump job approval rises amid record partisan gap: Gallup MORE will meet with the leaders of China and other large economies. By announcing the change before that meeting, China ensured its currency would not be a huge point of discussion there.
 
The administration will likely see China’s move as a vindication of its China strategy, which has been to gently push the Asian giant without trying to force the issue. The Bush administration also generally avoided confrontations on economic issues with China, which holds vast U.S. currency reserves.
 
“We welcome China's decision to increase the flexibility of its exchange rate,” Treasury Secretary Timothy Geithner said Saturday. “Vigorous implementation would make a positive contribution to strong and balanced global growth.”
 
Some outside groups warned a more flexible Chinese exchange rate will not solve the issue of the trade deficit.
 
John Frisbie, president of the U.S.-China Business Council, noted that much of what the U.S. imports from China could be imported from another country if the Chinese product became too expensive. He also said his group’s members have never cited the exchange rate as an issue affecting market access in China.
 
“Macroeconomics says an appreciating RMB would likely have some effect on trade flows, but the reality is probably not very much.”

This story was posted at 9:16 a.m. and updated at 11:43 a.m.