The United States Treasury Department has issued a key report in the ongoing dispute between Washington and Beijing over China's exchange rate policy. Treasury Secretary John Snow says China needs to do more to address the growing trade imbalance between the two countries -- but the U.S. stopped short of taking more dramatic action.
United States Treasury Secretary John Snow declined to name China a "currency manipulator" in his foreign exchange report to the U.S. Congress -- a move that could have led to trade sanctions. But Snow criticized the Chinese government for not making its currency exchange rates more flexible.
"We're critical of China, we're saying that China is in a position to do more, we've also just heard from their president that they intend to do more. We want to watch and make sure they do."
But the wait and see approach is not fast enough for some U.S. lawmakers who say the Chinese currency is undervalued by as much as 40 percent against the dollar.
Senator Charles Schumer was part of a trade delegation that visited Beijing in March in an effort to pressure the Chinese government to re-value its currency. He is co-author of a bill that would impose a 27.5 percent tariff on all Chinese goods entering the U.S. market.
"We believe if the administration is unwilling or unable to take action on its own, then our bill is really the only solution.
We are still hopeful the Chinese will move by September 30th as they strongly indicated to us on our trip there, but if there is no movement -- our bill becomes the only real resort to get China to treat us fairly.
Schumer says the lower exchange rate of the Chinese yuan gives Chinese-made goods a price advantage and makes U.S. goods more expensive in the world market. Trade analysts say the exchange rate is also partly responsible for the growing U.S. trade deficit, which surpassed $200 billion last year.
But Secretary Snow says the currency exchange rate is only a small part of a larger equation. "We've called on China to have a more flexible exchange rate as part of a broader approach to the imbalances. Currency flexibility is important but its not the totality of the response."
Snow says President Hu Jintao, who visited Washington last month, has agreed on a broad-based approach to improving U.S.-China trade relations, which includes increasing China's domestic consumption of U.S. products, and modernizing its financial systems.