A top U.S. Treasury Department official says trade relations with China are seeing significant progress, but adds that the United States continues to push Beijing on issues such as the valuation of the Chinese currency and market access.
Lael Brainard, Treasury Undersecretary for International Affairs says that while the Chinese currency, or the yuan, has risen 3.7 percent since June of last year, currency reform still needs to be a critical part of China's economic reforms going forward. "We’ve made progress on the currency issue but that does not mean we are satisfied," Brainard said.
In a speech Thursday to members of the U.S. - China Business Council, Brainard added that when you take into account domestic inflation in China, the currency has risen more than 10 percent.
She says that based on that and the fact that China's President Hu Jintao committed to continued progress on the currency, the Treasury Department did not name China a currency manipulator when it recently released a bi-annual report on foreign currencies.
Economists estimate China's currency is undervalued by up to 40 percent. U.S. lawmakers, trade unions and economists argue this gives China an unfair trade advantage - keeping the cost of the goods its sells extremely low.
On Thursday, a bipartisan group of U.S. lawmakers launched a new attempt to pass legislation on China's currency that cleared the House of Representatives last year but later died in the Senate.
The bill, if approved, would clear the way for the Commerce Department to treat China's undervaluation of the Chinese currency as a trade subsidy. It would allow companies to seek countervailing duties against imports from China that compete with U.S. products.
Asked whether the administration supports the bill, Brainard says the goal of the administration and Congress is the same - to push China to let its currency rise - but the methods they use to reach that goal are different. "We still believe that the Chinese currency is substantially undervalued and we are going to continue using the mechanisms we have to pursue that goal," she said.
Brainard says another area where the U.S. has seen improvement in trade relations with China is Beijing's willingness to address concerns about policies that limit access to the Chinese market. One policy of great concern is the so called indigenous innovation policy - which mandates that products be made, conceived and designed in China.
Brainard notes that starting last summer, China has made several commitments to ensure that its indigenous innovation policies do not discriminate against American companies.
In December, during a high-level trade meeting, China agreed that it would not make the location of the development or ownership of intellectual property a condition for government procurement bids.
When President Hu Jintao was in Washington last month, he made a similar pledge.
Brainard notes, however, that what matters is not what the U.S. and China agree to on paper, but what happens on the ground.
"And that’s why we know you will be and you can be assured we will be very focused on implementation of these commitments, on further developing the specificity with which we can make sure they translate into real jobs, real gains, real exports, real sales, using all the appropriate tools and leverage to make sure it happens," she said.
U.S. exports to China are booming and during Chinese President Hu Jintao's recent visit in January, contracts totaling US$45 billion were signed.
Much like the United States, China is also looking for improvements in the trade relationship. China wants more access to innovative U.S. products, greater investment opportunities in America and the same access other market economies enjoy here.
Brainard says the U.S. is willing to make progress on those issues, but notes that Washington's ability to move depends on how much progress China makes.