The U.S. Treasury Department on Thursday released its semiannual Report to Congress on International Economic and Exchange Rate Policies and concluded that the renminbi remains undervalued, but did not cite China for currency manipulation. The reason, of course, was China’s June 19th announcement that it would allow its exchange rate to be more responsive to market forces. The report went on to say that “What matters is how far and how fast the renminbi appreciates…We will closely and regularly monitor the appreciation of the renminbi.”
The National Association of Manufacturers has long held that the Chinese currency is a major factor in our trade imbalance with China and was a contributing factor to the global imbalances that have yet to be fully righted after the recent financial crisis. We have urged the Administration to engage with our trading partners and use every multilateral opportunity to press China to end its persistent currency undervaluation. We have also worked with our counterpart organizations in other countries to make the same case to their governments.
This is exactly what happened in recent months as governments from around the globe spoke out about the need for China to allow for a more market-determined currency value. Recognizing that is also in its own interest, China took the important step of moving away from its dollar peg in June. But Secretary Geithner is correct — how much China allows the renminbi to appreciate is key. The next Treasury report is due to Congress in October, and that is ample time to see enough movement in the currency to determine if the Chinese government is serious about correcting its significant undervaluation. Treasury is monitoring and we are all watching.