WASHINGTON - Senate Majority Leader Harry Reid urged Chinese President Hu Jintao to address his country's huge trade imbalance with the United States through a significant revaluation of China's currency.
I know China is committed to moving to a free floating currency eventually. But China's currency policy has been causing major distortions in the world economy for too many years already, and is continuing to do so now, Reid, a Democrat, said in a December 9 letter released on Friday.
In the mean time, I hope you would consider a significant revaluation to bring the value of the RMB in line with economic fundamentals, and after that, to return to a more robust version of the 'managed float' that your government previously maintained, Reid said.
The letter follows President Barack Obama's November trip to China, where he also raised concerns about China's currency practices.
Many U.S. lawmakers believe China deliberately undervalues its currency against the dollar to give Chinese companies an unfair advantage in international trade.
They see the huge U.S. trade deficit with China, which totaled $268 billion in 2008 and $188 billion in the first 10 months of 2009, as evidence of that.
Reid stopped short of threatening U.S. legislative action, but warned that the one-way nature of the imbalances in our economic relationship is a major factor causing Americans to question the efficacy of our trade policy.
Some U.S. lawmakers are pushing legislation aimed primarily at China that would allow the United States to slap duties on goods from countries with undervalued currencies.
Meanwhile, the U.S. Trade Representative's office is expected next week to release its annual report on how well Beijing is meeting its trade obligations under the World Trade Organization, which China joined eight years ago.
Reid told Hu that China's de facto currency peg puts pressure on other Asian countries to follow suit, exacerbating the problem for the United States and other countries.
Finally, your currency policy is not in the long-term interest of China: it creates inflationary pressure, promotes over-investment, and feeds asset bubbles within China. In short, it is one of the most serious economic problems in the world today, Reid said.
The Senate leader and close ally of Obama also expressed concern about rampant piracy in China of U.S. intellectual property ranging from music, movies and software to auto parts, clean energy products and pharmaceuticals.
This has led many in the United States to believe that there may be a Chinese policy to undermine American competitiveness in sectors where we are strong, while simultaneously benefiting from open access to the U.S. market, Reid said.
(Reporting by Doug Palmer; Editing by Xavier Briand)