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U.S. Treasury: China Is Not Manipulating Its Currency

Dec 27, 2011

The United States Treasury has decided not to accuse China of manipulating its currency. Instead, the Obama administration acknowledged that the yuan, which is also known as the renminbi, was appreciating but not at an "insufficient" rate.

The AFP report:

"'The real exchange rate of the renminbi (RMB) is persistently misaligned and remains substantially undervalued, though the degree of this undervaluation appears to have declined significantly,' the Treasury said in an annual report to Congress."

"The Treasury said the currency, also called the yuan, had risen 7.5 percent against the dollar in the 18 months since Beijing began allowing a managed appreciation, and by 12 percent if China's high inflation rate is figured in."

The issue of currency manipulation matters, because if China keeps its currency low it means it can sell its goods cheaper in places like the U.S. A cheaper Yuan also makes U.S. goods more expensive.

As the AP reports, "the decision will likely anger unions and Democratic lawmakers, who have accused Beijing of artificially holdings down the value of its currency to gain trade advantages."

Dow Jones News Wire reports that the Treasury had delayed this report, which was due in October, "in the hopes of using global summits as leverage to convince China to let the yuan appreciate more quickly."

Dow Jones says it's no coincidence that the report was released while congress members were on holiday.

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