China understands a stronger yuan is in its best interest although President Hu Jintao made no specific commitment to let the currency rise more rapidly, U.S. Vice President Joe Biden told Reuters on Thursday.
It needs to be more, Biden said during a brief visit to Capitol Hill where lawmakers met with Hu one day after his visit to the White House. We had significant discussions about that in our bilateral meetings. And it is being worked hard.
When asked whether Hu had made any commitments, Biden replied, Nothing specific.
The Obama administration has argued that China ought to let the yuan rise more rapidly to help tamp down inflation and spur domestic demand. Chinese consumer prices in December rose 4.6 percent from a year earlier, slowing from a 28-month high notched in November but still uncomfortably high.
Separately, a U.S. Treasury Department official said the Obama administration does not expect China to switch overnight to a freely floated currency but should let the revaluation process proceed more rapidly than it has done.
China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country, Treasury Assistant Secretary Charles Collyns told a meeting of the German Marshall Fund.
These policies have the effect of keeping the Chinese currency substantially undervalued, he said.
The United States has been pushing for years for China to let the value of its yuan currency CNY= rise more rapidly. Critics -- especially on Capitol Hill and among U.S. manufacturers -- argue that an artificially undervalued yuan boosts China's exports to the United States and crimps the ability of U.S. firms to sell their goods in China.
The yuan has risen about 3.7 percent against the dollar since June when China announced it was loosening its grip on the currency. Taking into account China's high inflation, the real effective exchange rate has risen even more.
SOME LAWMAKERS HOPEFUL
Collyns said the United States recognizes that it would be difficult for China to immediately float its currency but repeated that it should be permitted to move more flexibly in response to market forces.It's a process ... that needs to work smoothly, he said.
U.S. lawmakers apparently muted their concerns about China's currency policy during Thursday's meetings with Hu. Members of the U.S. House of Representatives skipped the currency question, but an aide said Senate Majority leader Harry Reid raised it in his meeting with Hu. For details, see [ID:nN19294126]
Senate Foreign Relations Committee Chairman John Kerry said that he expects China to let the yuan rise further.
Every indication is that China is going to continue, over a period of time, to strengthen the value (of its currency) ... and to raise it at a rate that is manageable in terms of their own inflation and other issues, Kerry told reporters after he and a few other senators met with Hu.
I think people are feeling somewhat encouraged on the currency issue, Kerry said.
Representative Kevin Brady, chairman of the trade subcommittee of the House Ways and Means Committee, said he and other Republicans intend to focus on a range of trade issues with China, not just currency manipulation.
It's not the silver bullet that many make it out to be, and for many American businesses trying to compete to win in China, not only is it not helpful, it distracts from tearing down other barriers that would provide us U.S. jobs, he told Reuters in a telephone interview.
President Barack Obama homed in on the sensitive topic on Wednesday during a joint news conference with China's leader, telling Hu that China's yuan remains undervalued.
While Hu listened to Obama's complaints, he gave no clues about Beijing's intentions on the hot-button issue.
Collyns said that China's efforts to control the rise in the yuan has caused money to flood into other emerging market economies, leading to an appreciation of their currencies and undermining their ability to compete with China.