We think most of you understand this issue. For years, China has been manipulating its currency, keeping it artificially low, thus making their goods cheaper and giving themselves a competitive leg up as a result. We can compete with the best of them given a level playing field, but this tilts the field in their favor. Our policy is clear: currencies should be set by the market, not by individual governments. In the past several years, China has amassed almost $700 billion in foreign exchange reserves — almost all in dollars — in order to suppress the value of their currency, the yuan. In our view, this is in clear violation of International Monetary Fund rules that prohibit the manipulation of exchange rates to gain an unfair advantage. China is now in the league of law-abiding nations in groups such as the World Trade Organization, and they are expected to comply with the same rules the rest of us do, like WTO and IMF rules.
We had hoped the Treasury Department — as part of its semi-annual review — would cite China as a currency manipulator, but that was not the case. “The initial steps by China to increase its exchange rate flexibility”, said Treasury Secretary Snow in a statement appended to their semi-annual report, “played an important part in this decision.” It is true that China has finally un-pegged its currency to the dollar, but while important symbolically, it was an infinitesimal move at best. We agree with Secretary Snow and President Bush, who both said in recent weeks that China needed to do more.
As Gov. Engler said, this decision dismayed us greatly and left us very disappointed. We will continue to press the Administration and the IMF on the issue. China ought to stop manipulating its currency, period. Enough is enough.
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