The Treasury will remain intensely focused on correcting China's substantially undervalued yuan despite a decision not to name Beijing a currency manipulator, a senior Treasury official said on Thursday.
We've made progress on the currency issue but that does not mean we are satisfied, Lael Brainard, the Treasury's Undersecretary for International Affairs, told the U.S.-China Business Council.
The Treasury last week in a long-delayed report declined to say that China manipulates its currency for trade advantage, citing a 3.7 percent rise in the yuan against the dollar since June and an even bigger change in the real bilateral exchange rate, which is adjusted for higher inflation in China.
Brainard said that based on these adjustments and Chinese President Hu Jintao's commitments on intellectual property, government procurement and boosting domestic demand, the Treasury concluded that China did not meet the legal standard for currency manipulation.
We will remain intensely focused on this issue to ensure accelerated progress to address the remaining substantial undervaluation of the RMB, Brainard said, referring to the yuan's other name, the renminbi.
The Obama administration is maintaining continuous interactions with all levels of the Chinese government and will be focused on ensuring that China lives up to its commitments, using all appropriate tools and leverage to make sure this happens.
Brainard's remarks also come ahead of a February 18-19 meeting of finance ministers from the Group of 20 major economies in Paris, where officials are focused on keeping up the momentum on China's recent progress in lifting the yuan's value.
The G20 last year pledged to work on indicative guidelines for countries' trade surpluses and deficits to help reduce global imbalances.
YUAN IN SDR BASKET
France, which chairs the G20 meetings this year, is proposing a major revamp of the monetary system, partly through greater use of the International Monetary Fund's unit of exchange, the so-called Special Drawing Rights, which are based on a basket of major currencies.
Brainard said the yuan could be included in the SDR basket if it is liberalized and made freely tradeable. The yuan is not currently a fully convertible currency.
Liquidity is very important, of course and its very important that currencies in that basket be freely useable and be large in international transactions.
Asked about new efforts in Congress to pass China currency legislation, Brainard said the lawmakers had the same goas as the administration -- eliminating the yuan's undervaluation.
However, she said that the administration has different means and mechanisms than Congress to pursue these goals and have been making substantial progress.
She added that the United States was also focused on China's priorities, which include access to high-technology U.S. products and greater investment opportunities in the United States and to be accorded the same access that market economies enjoy.
We are willing to make progress on these issues, but our ability to move on these issues will depend on how much progress we see from China, Brainard said.