WASHINGTON – Treasury Secretary John Snow received a tongue-lashing Thursday from senators over what they said was the adminstration's failure to force China to adjust its overvalued currency.
Sen. Charles Schumer, D-N.Y., said Treasury's report last week that declined to brand China as a currency manipulator was "a technical and legislative dodge."
"China is a manipulator," Schumer said at a Senate Banking Committee hearing, "and the administration is afraid to say so."
"There is considerable disappointment that once again Treasury has failed to make a currency manipulation determination with respect to China," said Banking Committee Chairman Richard Shelby, R-Ala.
Snow responded that while the department report did not find proof of manipulation — a finding that would have triggered talks between the two countries and possibly resulted in sanctions against China — "we are extremely dissatisfied with the slow and disappointing pace of reform of the Chinese exchange rate regime."
He said imposing trade sanctions against China over its exchange rate — considered a major factor in China's massive trade surplus with the United States — would "invite protectionist policies in other parts of the world" and was "clearly the wrong way to go."
Economists say China's yuan is anywhere from 15 to 40 percent overvalued against the dollar, making Chinese exports to the United States cheaper and contributing to China's 200 billion trade surplus with the United States last year, the biggest between two countries in world history.
"This is an incredibly important issue for my state," said Sen. Debbie Stabenow, D-Mich. "How many jobs are we going to lose from currency manipulation?"
Schumer, with Sen. Lindsey Graham, R-S.C., is sponsoring legislation that would impose high tariffs on China if it fails to adjust its currency. The two senators agreed to put off pushing the bill until the end of September, but say they are ready to move forward if China fails to make significant progress on the issue before then.
Chinese President Hu Jintao, in a visit to Washington last month, pledged to reduce China's trade surplus, and Snow said China is committed to making its currency regime more flexible, strengthening consumption and modernizing its financial system.
But Schumer said that while every other major currency has appreciated against the dollar since April 1, the yuan is only 0.2 percent stronger against the American currency. "It defies logic to say the yuan has not been manipulated."