Related Event: RMB to Go Up?
The Bush administration's effort to increase pressure on China to overhaul its currency regime got less than rave reviews from Federal Reserve Chairman Alan Greenspan and key central bankers from China, Europe and Japan.
Greenspan disputed the contention of U.S. manufacturers that a revaluation of China's yuan would make a significant impact on America's soaring trade imbalances.
Zhou Xiaochuan, the head of China's central bank, rejected the administration's contention that China was ready to move immediately to a more flexible currency. And Jean-Claude Trichet, the head of the European Central Bank, and Toshiro Moto, deputy governor of the Bank of Japan, both said the timing of any move should be left up to China.
The four men made their comments while appearing on a panel of central bank governors at a monetary conference being held in Beijing. Greenspan participated Tuesday morning Beijing time by satellite from Washington.
The administration did receive support on Tuesday from a key lawmaker on trade issues. House Ways and Means Committee Chairman Bill Thomas told the U.S. Chamber of Commerce that he believed legislative pressure will probably be needed to get China to drop its tight peg to the dollar.
"We have to let China know, probably from a legislative position, that the administration's recent exhortations are supported by the Congress," Thomas said. He did not spell out what legislation he would support. Legislation has been introduced in both the House and Senate to impose across-the-board 27.5 percent tariffs on Chinese products if China does not act.
At the White House, presidential spokesman Scott McClellan said Bush met with a group of Chinese legislators on Tuesday and the currency issue was discussed.
"China has expressed a commitment to moving forward toward a flexible market-based exchange rate and we continue to urge them to move in that direction," McClellan told reporters.
The Bush administration in recent weeks has intensified the pressure on China to stop linking the yuan at a fixed rate to the dollar, a practice that American manufacturers say has undervalued the yuan and given China a huge trade advantage.
Greenspan, however, said in response to an audience question that getting China to stop linking its currency tightly to the U.S. dollar would have little impact on America's trade deficit with China, which hit a record $162 billion last year, the largest imbalance ever recorded with a single country.