06/25/2005, 00.00
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US Parliament: Beijing must revalue the yuan within three months

The United States threatens to impose taxes on Chinese exports. It seems Beijing will now be forced to adjust exchange rates

Washington (AsiaNews/agencies) – The US parliament is debating a bill proposed by four Republican MPs, which gives Beijing three months to revalue the yuan or to face a sanction of taxes on its exports to the US (worth 197 billion US dollars in 2004).

MP Phil English, one of those submitting the bill, said the current exchange rate – unchanged since 1984 at 8.28 yuan per dollar – is "too low" and leads to a drop in 40% of prices of Chinese goods to the detriment of American production. However, John Snow, secretary of the Treasury Department, holds that any protectionist measure in the trade sector is "mistaken"; instead he proposes finding a solution through "dialogue with China".

The new law stipulates that the Treasury reports within 60 days about whether the dollar-yuan exchange rate is correct or not. If the rate does not correspond to the real value, within 30 days the Treasury must apply a tax on Chinese goods exported to the US, which would be equal to the estimated adjustment of the exchange rate, with a view to reaching equilibrium in prices. On 20 June, after a meeting with European public figures, President George W. Bush said the US and EU "are in agreement in asking Beijing for greater flexibility in the exchange rate of the yuan."

Beijing foresees such pressure during the upcoming G8 summit in Gleneagles in Scotland from 6 to 8 July, to which India, Brazil, South Africa, Mexico and China (President Hu Jintao will attend) have been invited. In the past, China showed its willingness to review its currency, but only in case of "favourable conditions". Many observers are convinced that, in any case, revaluation will be a must by autumn.

Meanwhile Beijing is reining in speculation from those who hold revaluation is imminent. Economist Fan Gong, director the National Institute for Economic Research in Beijing, says China is no hurry to revalue its currency, even if the government announced some time ago that it would do so in the long-term. He warned it is "very dangerous… to speculate about revaluation", since the government could resist such pressures for a long time.

Haruhiko Kuroda, president of the Asian Development Bank, underlined that for the stability of Asian economies, it is important revaluation of the exchange rate takes place "gradually and not in a rapid and inflated manner". (PB)

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