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U.S. yuan bill draws...

U.S. yuan bill draws strong criticism

The controversial bill passed by the U.S. Senate to press China to let its currency rise further provokes strong criticism this week.

China voiced its strong opposition hours after the U.S. hours after the Senate on Tuesday voted to pass the currency bill that allows Washington to impose punitive tariffs on Chinese exports if the RMB value is found to be unfairly “misaligned.”

The bill is essentially trade protectionism, a serious violation of World Trade Organization rules, said China’s Foreign Ministry spokesman Ma Zhaoxu, warning that the move may trigger trade wars and hinder global economic recovery.

China’s Ministry of Commerce also expressed adamant oppositions, saying that the U.S. has sent the “wrong signal by escalating trade protectionism” at a time when the global economy is facing serious challenges.

The People’s Bank of China (PBOC) said that blaming China’s “undervalued” currency will not solve U.S. domestic problems, such as high unemployment and huge trade deficits, nor will it reduce trade imbalances between the two countries.

China has accelerated the reform of yuan exchange rate formation mechanisms and achieved pronounced progress in recent years. A report issued by the PBOC on Wednesday said the yuan has appreciated against the dollar by 30.2 percent since July 2005 when China started to reform its currency exchange rate formation mechanism.

U.S. economists also expressed concerns about the damage the bill may do to trade relations.

“It is certainly not good news as U.S.-China tension is the last thing investors need,” Panos Mourdoukoutas, professor and chair of the Department of Economics at Long Island University, wrote in his column in Forbes magazine.

“Particularly vulnerable are major U.S. multinationals with a large presence in China,” he added.

The U.S.-China Business Council (USCBC), a leading bilateral business organization, said Wednesday in a statement the controversial currency bill will do more harm than good to the two countries.

Limiting imports from China would not mean an increase in U.S. employment or lower the trade deficit, and the United States will just shift the imports to another overseas supplier. If this is intended to be a jobs bill, it is a jobs bill for Vietnam, Indonesia and Mexico, noted the statement.

Most analysts speculate that the possibility of the bill becoming law is slim as it would have to clear the Republican-controlled House of Representatives and then be signed by President Barack Obama.

Given the volatility of the global markets and the world economy, U.S. House of Representatives Speaker John Boehner warned on Wednesday that the currency bill posed a “very severe risk” of a trade war.

“The White House has serious concerns … that many elements violate international trade rules, and we have expressed those deep concerns to the members of Congress,” U.S. Ambassador to China Gary Locke said on Thursday.

Some analysts said that the bill is more a political gesture to calm frustration among U.S. voters ahead of the presidential election next year than an effective tool.

Despite all these high-pitched passion-filled claims, the much-debated U.S. currency bill may end up being just a symbolic move, according to a BBC report.