Tag Archives: US-China Trade

US Treasury says bill on China forex could boomerang, Paulson adds pressure on Beijing

Amid escalating pressure and intensified lobbying against China in the US, Treasury Secretary of US, Henry Paulson once again urged China to permit its currency to appreciate faster, at the same time, also raising product-safety and environmental issues during the recently held meetings with senior Chinese officials. In addition, Paulson also reviewed progress on a commitment by China to open up local brokerage services to more foreign involvement. Chinese securities regulators have reportedly said that they are planning to lift a moratorium on joint ventures between foreign and Chinese brokerages in early autumn. However, the Chinese government had earlier indicated that it would lift the moratorium by December. Though the Treasury Secretary Henry Paulson has categorically said that he was assured that China is committed to currency flexibility and more financial reforms, however Beijing has offered no precise changes or measures that could help placate US congressional resentment over China’s huge trade surplus. Washington’s point man on China, Paulson, is trying to prevent extreme measures by congressional critics who are pressing for punitive actions over Beijing’s currency controls. At the same time, in a recent development, a Senate committee has approved a bill that would require the administration to take up currency manipulation cases before the International Monetary Fund. Technically, now the bill has allowed the Treasury to avoid referring to China as a currency manipulator. Analysts were assured enough that Beijing would not make any concessions during Paulson’s visit. The recent visit is widely perceived as an effort to show Congress that ‘Strategic economic Dialogue’ is making progress. Paulson has said explicitly that he believes Chinese leaders are wondering if they will ever be able to satisfy Washington. This can be substantiated with the fact that former Goldman Sachs chief executive has been given unexpectedly wide access to top Chinese officials, which could be dubbed as a sign of the importance Beijing places on protecting economic relations with the US. Paulson has also said that Beijing’s currency controls are less significant than barriers to foreign competition in its financial industries and other structural factors in driving the trade surplus. In the meanwhile, the US congress is contemplating another bill aimed at Beijing that would involve Treasury to identify and punish currency manipulators. However, Paulson has rejected such action saying that they would damage Washington’s efforts to encourage Beijing to reform. Speaking on the issue he said, ‘Legislation would be counterproductive and would undermine what we’re trying to do here’. Deputy Assistant Treasury Secretary Mark Sobel has warned a House of Representative trade subcommittee saying, ‘if the United States adopts currency legislation that is perceived abroad as unilateralist, investors’ confidence in the openness of our economy could be dampened, diminishing capital inflows into the United States and potentially putting upward pressure on interest rates and prices’. In a related development, the Bush administration warned congress that lawmaking campaign to compel China into letting its currency rise in value more rapidly could boomerang and damage the US economy. The administration is of the view that the US lawmakers have attempted constructing an economically detrimental assessment abroad that the US is becoming ‘an isolationist nation.’ On the other hand, foreign banking executive have stated that they were pushing for the moratorium on new brokerages joint ventures to be lifted by September, earlier than the Communist party congress in October, which they think could further delay the opening. Several overseas banks are, at present, in negotiation with potential partners in China in willingness to do deals to enter a sector which now has only a very few foreign participants. Read Image