Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Senators talk tough on China currency

By Ben Rooney, staff reporter


NEW YORK (CNNMoney) -- Senate Democrats renewed their push to crack down on countries that manipulate their currencies, ahead of a key meeting between Chinese President Hu Jintao and U.S. President Barack Obama in Washington.

A bill introduced Monday by Senator Charles Schumer and two other Democrats, would impose penalties, including possible tariffs, on nations that manipulate their currencies -- particularly China.

The Senators told reporters in a conference call that China's currency and trade polices undercut U.S. manufacturers and are costing American jobs.

How do you view the economic relationship between the U.S. and China?
  •   Beneficial to both
  •   Favors China
  •   Favors the U.S.
  •   Not sure
sponsored by

"China's currency is like a boot on the throat of America's economic recovery," Schumer said.

The senators and other critics say the government-controlled People's Bank of China artificially undervalues the yuan, bringing down the cost of Chinese exports and giving it an unfair advantage in the international market.

While the yuan has risen modestly since China announced plans last year to let it trade in a prescribed range against the dollar, the Senators say the currency is still undervalued by up to 40%.

The latest effort to address the currency issue comes as President Hu travels to the United States for a high profile meeting with President Obama on Wednesday. The U.S. has been ratcheting up pressure on China to address its undervalued currency and dependence on exports, as the world's most populous nation has roared out of the global recession.

Treasury Secretary Timothy Geithner said last week that China needs to do more to address its currency and trade imbalances. But he was confident that such changes would take place, adding that higher inflation in China is making U.S. goods more competitive there, offsetting the advantage of the cheaper yuan.

In written remarks published Monday, Hu called the dollar-dominated international currency system a "product of the past" and said the yuan will emerge as a global currency.

He also criticized the Federal Reserve for its plan to buy $600 billion worth of U.S. debt to stimulate the economy. The policy is particularly alarming for China, given that it holds billions of dollars in government debt.

But Hu sought to ease tensions between the two nations, saying he wants to strengthen ties with the United States. "We both stand to gain from a sound China-U.S. relationship, and lose from confrontation," he said.

The bill "sends a clear message to President Hu," according to Schumer. "We are fed up with your government's intransigence on currency manipulation, and if you refuse to take action, we will force you to do so."

The new legislation, called the Currency Exchange Rate Oversight Reform Act of 2011, would establish clearer criteria for the Treasury Department to designate a nation as a currency manipulator, paving the way for more strict penalties.

The bill also outlines a number of steps the U.S. would be required to take against countries deemed currency manipulators.

The actions range from relatively benign steps such as opposing governance changes with the International Monetary Fund, to more aggressive moves like imposing duties on goods made in nations designated currency manipulators.

Under the proposal, the U.S. would be obliged to dispute settlements made by designated nations in the World Trade Organization and require the Federal Reserve to directly intervene in the currency markets in cases where currency manipulation continues for over one year.

The bill combines elements of legislation introduced last year by Schumer and Republican Senator Lindsey Graham of South Carolina, with a separate proposal by Democratic Senators Debbie Stabenow of Michigan and Bob Casey of Pennsylvania. To top of page

Index Last Change % Change
Dow 16,058.35 -469.68 -2.84%
Nasdaq 4,636.11 -140.40 -2.94%
S&P 500 1,913.85 -58.33 -2.96%
Treasuries 2.17 -0.03 -1.27%
Data as of 6:54pm ET
Company Price Change % Change
Bank of America Corp... 15.58 -0.76 -4.65%
Apple Inc 107.72 -5.04 -4.47%
General Electric Co 23.88 -0.94 -3.79%
Ford Motor Co 13.72 -0.15 -1.08%
Microsoft Corp 41.82 -1.70 -3.91%
Data as of 4:03pm ET
Sponsors

Sections

McDonald's has been testing an all-day breakfast menu in several markets for months. Now it has said when the change will go nationwide: October 6. More

Iran could be pumping more than four million barrels of oil a day by the end of 2016, the country's oil minister tells CNN in an exclusive interview. More

The Federal Aviation Administration approved the largest ever fleet of commercial drones owned by a company called Measure. More

How do you run a successful crowdfunding campaign? Indiegogo's CEO Slava Rubin offers his top tips and mistakes to avoid. More

Here's what you need to earn to afford a home in the 27 biggest metro areas in the country, according to HSH.com. More