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China Balks At Significant Yuan Appreciation
Vol. 852 
September 20, 2011

In response to renewed criticism from U.S. lawmakers, Chinese officials say they will not allow the yuan to rapidly increase in value against the dollar, further intensifying an ongoing international trade debate. China's retort, released through the country's official Xinhua news agency in an editorial, also effectively accuses the U.S. of not taking responsibility for its own economic struggles. "China will not blindly, because of pressure from a bill in another country's congress, let its currency rise," Xinhua said.

For several years, U.S. officials have maintained that China deliberately undervalues the yuan in an attempt to give its companies an unfair price advantage in global trade. Last week, U.S. Senate Democratic Leader Harry Reid said lawmakers will try to soon pass legislation aimed at forcing China to stop holding its currency below market value. The Xinhua editorial said Reid has "stepped into a serious mistaken zone" regarding the yuan. "The high unemployment rate in the U.S. is rooted in its own sluggish economy and must be solved by itself," Xinhua said

In the Xinhua article, China said it intends to keep its currency at a "reasonable and balanced" level, arguing a significant rise would hurt the global economy. Since China ended a de-facto peg of its currency to the dollar last June, the yuan has appreciated by a total of 6.75%. China's decision to allow the yuan to rise in value is part of a stepped-up effort to curb inflation in the Asian superpower. A stronger yuan also translates into rising prices on goods imported from China.

While U.S. lawmakers have been threatening to punish Chinese exports with tariffs since 2005, no legislative action has been taken. Last year, the U.S. House of Representatives passed a bill that would have levied extra duties on Chinese goods, but the measure was never approved by the Senate.

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