Republican and Democratic members of Congress sent a letter to the Commerce Department calling for an investigation into “China's currency manipulation”.
It is “a potential first step in a process that could lead to significant, US-imposed tariffs on imports from China”, said Democratic Senator Charles Schumer, who jointly wrote the letter with Republican Senator Lindsey Graham.
US economists and political leaders have accused China of undervaluing its currency in order to increase the competitiveness of its exports. In January, US Treasury Secretary Timothy Geithner accused China of manipulating its currency, only to retract later. The net result is that the US trade deficit with China ballooned to US$ 268 billion last year.
Similar charges have been made elsewhere in the world.
During Barack Obama’s visit to China, Beijing indicated that it was willing to let its currency to float but China’s Commerce Ministry shot down the idea, saying any move on that front would have to wait for better times.
Even though Obama said he raised the issue with Chinese leaders, neither President Hu Jintao nor Prime Minister Wen Jiabao publicly referred to any possible revaluation of the yuan.
Some Chinese economists have even accused the United States of manipulating the value of the dollar, by keeping interest rates close to zero.
In article published yesterday in the South China Morning Post, economist Andy Xie said that yuan’s fixed rate against the dollar spared the United States hyperinflation and is helping the international community pull out of the global crisis.
However, for economist Maurizio d’Orlando, the yuan’s low value is “abnormal, beyond any parameter or conceivable excess.” At present, the US dollar is pegged at 6.8333 yuan. However, the Chinese currency should be re-valued by 33.43 per cent according to the purchasing power parity rate. The dollar would thus be worth 5,121 yuan (see Maurizio d’Orlando, “G8, toxic securities, US and Chinese addictions,” in AsiaNews, 7 July 2009)
For d’Orlando, “China’s strategy is hegemonic, based on a quest for national grandeur in the Far East. The cost is the destruction of the manufacturing capacity of the rest of the world and the reduction of entire populations to virtual slavery” in China.