Democrats in the US House of Representatives urged President George W. Bush on Thursday to take more aggressive action to pressure China to raise the value of its currency and also to host an international meeting to rebalance exchange rates.
"Now, more than ever, it is critical that the administration use all available tools at its disposal to address China's protracted, large-scale intervention in the foreign exchange markets to maintain an undervalued currency," House Ways and Means Committee Chairman Charles Rangel and 14 other committee Democrats said in a letter to Bush.
The Bush administration's four years of "quiet diplomacy" to pressure China to raise the value of its currency have failed and it is time for a new approach, the lawmakers said in their letter, which came one week before US Treasury Secretary Henry Paulson is to head to China for talks. "China's undervaluation of the yuan makes US exports to China more expensive and Chinese exports to the United States cheaper, contributing to massive US trade deficits, lost jobs and a suppression of US economic growth," the lawmakers said.
The US trade deficit with China grew in 2007 to a record $256 billion, even though the overall US trade gap narrowed last year and Beijing has taken some modest steps to raise the value of the yuan.
The lawmakers urged Bush to use US leverage within the International Monetary Fund to pressure China to move more quickly to a market-based exchange rate and to take action against Beijing at the World Trade Organisation for manipulating its currency in violation of global trade rules. The Treasury Department also should reverse longstanding practice and formally label China as a currency manipulator in an upcoming semi-annual report, the lawmakers said.
China's currency practices are a problem for both the world economy and the United States, but other countries - particularly in Asia - also manipulate their currency to boost exports and discourage imports, the lawmakers said.
"The administration should invite other major industrial and emerging-market economies to a special meeting to address currency misalignment and global economic imbalances," the lawmakers said, noting the 1985 Plaza Accord set a precedent for countries to take co-ordinated actions on currency.