China - China: US bill risking trade war

CHINA is warning the United States that it is "adamantly opposed" to a proposed bill aimed at forcing Beijing to let its currency rise, saying its passage could lead to a trade war.

The Chinese central bank and the ministries of commerce and foreign affairs accused Washington of "politicizing" global currency issues.

The bill to be debated in the US this week violates World Trade Organization rules and forcing the yuan to appreciate would weaken joint efforts to revive the global economy, the foreign ministry said.

"By using the excuse of a so-called 'currency imbalance,' this will escalate the exchange rate issue, adopting a protectionist measure that gravely violates WTO rules and seriously upsets Sino-US trade and economic relations," foreign ministry spokesman Ma Zhaoxu said. "China expresses its adamant opposition."

On Monday, US senators voted to open a week of debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the US government to slap countervailing duties on products from countries found to be subsidizing their exports by "undervaluing their currencies."

Ma urged US legislators to "proceed from the broader picture of Sino-US trade and economic cooperation" and forsake protectionism.

He said China will continue to gradually reform its currency policy, "strengthening the flexibility of the yuan exchange rate."

China has denied claims that its policies are responsible for trade imbalances and a high rate of unemployment in the US, saying that structural problems were to blame.

"It is widely understood that the yuan exchange rate is not the cause of China-US trade imbalances," Ma said yesterday.

China's central bank said that the bill failed to address the underlying issues in the US economy.

"The yuan bill passed by the US Senate will not solve its problems, such as insufficient savings, high trade deficit and high unemployment rate, but it may seriously affect the whole progress of China's reform of its yuan exchange rate regime and may also lead to a trade war which we would not like to see," it said.

China's currency has appreciated 7 percent since June 2010, when the central bank decided to adopt a more flexible exchange rate, said Ma, adding that China would continue "proactive" and "gradual" reform.

The central bank added that Chinese inflation had already pushed the real yuan exchange rate further "towards the equilibrium."

Ministry of Commerce spokesman Shen Danyang said the US was trying to pass on the blame for its own failings. "Trying to turn domestic disputes onto another country is both unfair and in violation of international rules, and China expresses its concern," he said.

Shen said any move by the US to force the yuan to appreciate would undermine joint efforts to revive global economic growth, which took another blow on Monday with data showing that global manufacturing shrank in September for the first time in more than two years.

"It will weaken China-US efforts to join hands and together promote global economic recovery," he said. "The global economy is in a complex, sensitive and changeable period, and so even more needs a stable international monetary environment."

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