The U.S. Treasury again shied away from labelling China a currency manipulator on Tuesday, but it rapped the country for not moving fast enough on exchange rate reforms.
Some U.S. politicians have argued that China has gained an unfair competitive edge in global markets by keeping the yuan artificially low to boost exports.
But the Treasury, in a semi-annual report, said that statutes covering a designation of currency manipulator have not been met with respect to China.
Even so, Treasury said appreciation in the yuan has been too slow. The value of the yuan, which Beijing manages closely, has risen by 4 percent against the dollar this year and 7.7 percent since China dropped a firm peg against the greenback in June 2010.
The movement of the (yuan) to date is insufficient, the Treasury said in a statement following the release of its semi-annual report to Congress on international economic and exchange rate policies.
Treasury will closely monitor the pace of appreciation and press for policy changes that yield greater exchange rate flexibility, a level playing field, and a sustained shift to domestic demand-led growth.
The Peterson Institute for International Economics recently estimated the yuan was undervalued by 24 percent against the dollar, down from 28 percent earlier in the year. It attributed the change to both Beijing's policy of gradual currency appreciation and higher Chinese inflation.
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U.S. Treasury Secretary Timothy Geithner has said the law that requires the administration to determine whether U.S. trade partners are deliberately undervaluing their currencies is a poor tool to push Beijing on the yuan.
Instead, the United States has tried to use international economic fora, such as the Group of 20 leading nations and the International Monetary Fund, to ramp up pressure on Beijing to move more quickly to a more-flexible currency.
It's not very surprising. It's sort of sliding it in under the radar. They're (Treasury) really not in a position to make any major moves at this point, said Sean Incremona, an economist at 4Cast in New York.
The Treasury Department has not labelled country a currency manipulator since July 1994, when it cited China. A designation would require the United States to step up negotiations with Beijing on the yuan's value.
The yuan slipped on Tuesday as strong dollar demand from corporations offset a record high mid-point fixed by the People's Bank of China. The central bank set an all-time high dollar/yuan mid-point in an apparent hope to let the yuan rise a little more at the end of 2011 so as to make the yuan's full-year nominal appreciation look bigger, traders said.
(Additional reporting by Luciana Lopez; Editing by Leslie Adler)