Damned if you do, damned if you don't: more dollar killing moves, and Bushmonkies cheer, singing again, "Bring it on!"

U.S. welcomes China yuan move, wants faster change

By David Lawder

WASHINGTON (Reuters) - China's decision to widen its currency's trading band is a "useful step" but Beijing must still move more quickly to having the market set the currency's value, a U.S. Treasury Department official said on Friday.

Alan Holmer, the Treasury's special envoy for China, said he would keep pressing the case for greater yuan flexibility at high-level economic talks between U.S. and Chinese officials next week in Washington.

Beijing on Friday announced that beginning on Monday it would allow the yuan to rise or fall by 0.5 percent against the dollar each day, compared to a 0.3 percent margin previously. On most days, the yuan ranges less than 0.15 percent from its dollar midpoint.

"The Treasury view is that this is a useful step towards greater flexibility and an eventual float of the currency," U.S. Special Envoy for China Alan Holmer told a news briefing. "It's important now that Chinese authorities use the wider band and allow greater currency movement within each day and over time."

Holmer said, however, the Bush administration believes that the 7.9 percent appreciation of the yuan against the dollar since July 2005 is "not fast enough."

"We will continue to press the Chinese as we have over the course of a very extended time period to accelerate the appreciation of their currency," Holmer said.

The move did little to impress members of Congress, who have been threatening trade restrictions on China unless its yuan trades more freely. Many lawmakers believe that China's artificially low currency value makes American manufacturers unable to compete with a rising flood of cheap imported Chinese consumer goods.

"This is a nice gesture, but in the past, most of their gestures have not produced any concrete change," said New York Sen. Charles Schumer, one of China's biggest critics on Capitol Hill.

"To widen the band is well and good, but if they don't use the band, nothing will happen," said Schumer, a Democrat. "The Chinese should recognize that they face the prospect of strong WTO-compliant legislation if there isn't significant progress."

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat and the panel's ranking Republican, Alabama Sen. Richard Shelby, urged Treasury Secretary Henry Paulson to use all tools at his disposal "to eliminate the unfair trade advantage resulting from China's currency and discriminatory market access policies."

"Should you find that Treasury's existing authority is insufficient to eliminate these unfair trade practices, we expect that you will communicate to the Senate Banking Committee any legislative options that may be necessary for improving our nation's ability to ensure a level playing field for U.S. firms and workers," the senators wrote.

The yuan's value will be one of several topics to be discussed next week in the "strategic economic dialogue" between top U.S. and Chinese officials. Some of the Chinese delegation are expected to meet with key members of Congress.

Holmer also said officials will discuss reforms of China's financial services sector and other services industries. Among these would be improving airline and air cargo access to each others' markets and allowing more foreign banks to operate in China.

The meetings also cover topics such as intellectual property rights and efforts to shift the Chinese economy from one primarily focused on exports to a model that emphasizes increased domestic consumption and encourages Chinese citizens to decrease their high savings rates.

"Rebalancing the Chinese economy towards consumption will raise the welfare of the Chinese people and allow China to grow in the future without generating huge trade surpluses," Holmer said. "These are goals our two countries share."

Original article posted here.