U.S. Treasury Secretary John Snow says he will continue to pressure China to adopt a flexible currency, in an attempt to reduce a record U.S. trade deficit.
Mr. Snow says the Bush administration is doing everything it can to convince China to move faster when it comes to changing the way the Chinese yuan is valued against the U.S. dollar. "We're not satisfied with the pace of reforms on currency. We want to see faster movement there. We are pleased that the Chinese have reaffirmed the commitment to move to flexibility. It's important for them, it's important for us, it's important for the world economy," he said.
Many economists say the record $166 billion U.S. trade deficit, announced Tuesday by the Commerce Department, is largely due to an undervaluation of the dollar in key markets such as China and Japan. That means goods sent from China to the United States are increasingly inexpensive. U.S. products exported to China cost more, making it more difficult for American companies to sell their goods abroad.
Since 1994, China has fixed the exchange rate at 8.3 yuan to the U.S. dollar.
The International Monetary Fund and the Bush administration say that's too low. Both are calling for China to make adjustments to its financial system so that market forces determine exchange rates.
China has agreed, in principle, but says the pace of reform will take time.
The Treasury Department has appointed a special envoy to assist China's financial restructuring, which includes dealing with bad loans, increasing the amount of currency available for exchange, and creating a system for automobile financing.
Mr. Snow says exchange rate change does not have to wait until all China's fiscal improvements are complete.