China says hopes U.S. does not politicize yuan dispute

Reuters News
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Posted: Sep 28, 2011 4:19 AM
China says hopes U.S. does not politicize yuan dispute

BEIJING (Reuters) - China's Foreign Ministry on Wednesday warned the United States not to turn the yuan into a political issue, reiterating that the exchange rate was not to blame for the U.S. trade deficit with China.

The remarks, made by ministry spokesman Hong Lei at a regular news briefing, came ahead of U.S. Senate plans to vote next week on legislation aimed at China's currency practices.

"We have reaffirmed our position repeatedly. The renminbi's exchange rate is not the cause of the trade imbalance between China and the U.S.," Hong said. "We hope the U.S. will maintain the overall interests of bilateral trade and economic relations and refrain from politicizing this issue."

Renminbi is the formal name for China's currency, which is also called the yuan.

The Foreign Ministry has no say in China's currency policy, but it is typically the only government department that will regularly comment on the issue.

China has repeatedly rejected criticism that it deliberately undervalues its currency to give its companies a price advantage in international markets.

It says it is committed to moving to a more flexible exchange rate but at its own pace.

Senate Majority Leader Harry Reid said he planned to bring up the legislation next week when lawmakers return from a break.

A key provision of the Senate bill would instruct the Commerce Department to treat undervalued currencies as a subsidy under U.S. trade law, allowing companies to ask for countervailing duties against imports on a case-by-case basis.

The bill reflects growing frustration in the United States over its ballooning trade deficit with China, which hit a record $273 billion in 2010.

Many lawmakers believe China's currency practices contribute to the deficit. They argue that Beijing undervalues its currency by as much as 25 percent to 40 percent against the U.S. dollar, which gives Chinese companies an unfair price advantage and has caused U.S. companies to layoff workers or shut down.

China says it is being blamed for problems stemming from the U.S.'s own domestic economic problems.

(Reporting by Ben Blanchard, Writing by Sui-Lee Wee, Editing by Ken Wills)