WASHINGTON – The Bush administration, facing growing unhappiness in Congress over America's soaring trade deficit with China, will get a chance this week to present its concerns to top Chinese economic officials.
Both Finance Minister Jin Renqing (search) and Zhou Xiachuan (search), the head of China's central bank, have been invited to attend a luncheon meeting on Friday where Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan will serve as hosts.
The discussions will be part of a gathering that the world's seven richest industrial countries will be holding to get the views of China and four other major developing countries — Russia, India, Brazil and South Africa.
In announcing the invitations to China and the other countries on Monday, Treasury spokesman Tony Fratto refused to go into details about what topics would be discussed.
However, it was expected that currencies would play a role in the talks, given that the United States has made a major effort over the past two years to gain support from its G-7 allies for a united front in pressing China to allow its currency to rise in value.
China announced June 30 that it was moving away from a decade-long system in which it tightly linked the value of its currency, the yuan, to the U.S. dollar. However, after the initial small rise in value of 2.1 percent, the yuan has remained stuck at a level that analysts say is far too low to make a dent in America's ballooning trade deficit with China.
American manufacturers contend the yuan (search) is undervalued by as much as 40 percent against the dollar. That means Chinese goods are much cheaper for American consumers and American products are much more expensive when sold in China.
Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., are sponsoring legislation that would impose 27.5 percent across-the-board tariffs on all Chinese products coming into the United States in an effort to pressure the Chinese to revalue their currency further. They have the legislation on hold now but have vowed to resume pushing for a vote if China does not make further progress.
America's trade deficit with China hit a record of $162 billion last year, the biggest imbalance ever recorded with a single country. And this year's gap is running 30 percent above the 2004 pace, reflecting a surge in imports of Chinese clothing and fabric after the removal of global quotas at the beginning of the year.
The meeting Friday would mark the third time the Chinese have participated in the discussions with the Group of Seven nations — the United States, Britain, Canada, France, Germany, Italy and Japan.
The first time China participated in a G-7 finance meeting was in the fall of 2004, at Snow's invitation. They also participated in a February G-7 meeting in London but skipped the April session, reportedly because they did not want to face more pressure regarding their currency.
The G-7 discussions will be a prelude to the annual meetings over the weekend of the International Monetary Fund and the World Bank. In addition to the G-7 talks, Snow was scheduled to hold daylong discussions at Treasury on Thursday with top finance officials of Iraq, seeking to assess the progress the country is making in rebuilding its economy.