Congress To Punish China’s Manipulation of Exchange Rate

Next week, the U.S. Senate will consider a proposal involving the RMB exchange rate. If it is passed, the motion will authorize the U.S. to take legal and trade countermeasures against China’s RMB exchange rate policy.

However, China’s Foreign Ministry spokesperson Hong Lei announced yesterday that China hopes that the U.S. will effectively maintain the overall steady development of U.S.-China trade relations, that they will not politicize the issue and not push the motion forward.

The threat of a global economic recession as well as America’s unemployment rate being as high as 9 percent, plus the growing heat of the upcoming election in November 2012 all combine to contribute to the nervousness surrounding the exchange rate issue.

The Senate majority leader, democratic Sen. Harry Reid, claimed this week that the probability of passing the motion was pretty high. The bill would require the U.S. government to use estimates which underestimate the magnitude of the exchange rate when calculating countervailing import tariffs.

According to the Financial Times, trade policy experts stated that this motion would probably pass.

The U.S. House of Representatives supported similar legislation last year in a non-binding vote. The White House has so far refused to comment on the current version of the bill.

In the meantime, business groups representing multinational companies have already taken actions to oppose this motion.

Representatives have expressed that China’s violation of intellectual property and manipulation of the government procurement market were much more important issues, but these groups admitted privately that the possibility of the motion passing is very real.