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Financial Times (London, England)
July 15, 2005 Friday
London Edition 2
SECTION: THE AMERICAS; Pg. 8
LENGTH: 500 words
HEADLINE: China 'is planning to revalue its currency' TREASURY SECRETARY:
BYLINE: By ANDREW BALLS, RICHARD MCGREGOR and DEMETRI SEVASTOPULO
DATELINE: WASHINGTON and BEIJING
BODY:
The Bush administration has told key senators that it expects China to revalue its currency in August ahead of a planned visit to Washington by President Hu Jintao in September, according to people familiar with the matter.
Senators Charles Schumer and Lindsey Graham, co-sponsors of a bill that would impose a 27.5 per cent tariff on Chinese imports, agreed to delay a vote on their bill after receiving what they regarded as an assurance that China would move on its currency next month.
John Snow, the Treasury secretary, told the senators in a meeting at the end of June that he believed China would move to allow the value of the renminbi to increase against the dollar in August, the people familiar with the discussion said.
That assurance, which came in a meeting with Alan Greenspan, the Federal Reserve chairman, persuaded the senators to postpone the vote on legislation that threatens trade sanctions against China.
"Senator Graham and I believe that the administration is convinced that China will begin a revaluation process this summer, forced by our bill's success in the Senate," Mr Schumer said.
While the senators have agreed to postpone the vote for now on the basis of the administration's assurances, inaction by China would probably produce even stronger support for trade sanctions in the Senate.
In private contacts, the US Treasury has told Beijing that it needs to revalue the renminbi by at least 10 per cent against the dollar to prevent protectionist legislation in Congress.
The renminbi has been pegged to the dollar for the past decade. China is considering a currency regime similar to the managed float operated by Singapore.
Under this system, the renminbi would be pegged to a basket of currencies reflecting the country's trade, but details of the weights of the basket would not be made public, a person familiar with China's thinking said.
Tony Fratto, US Treasury spokesman, said: "Secretary Snow did not provide an assurance on a specific time-frame for when China would reform its currency regime. Targeting a specific date or time-frame is counter-productive.
"That said, it is clear that China is prepared to move now. It would be in the best interests of China, and the global financial system, if these reforms came sooner rather than later."
At the meeting with the senators, Mr Snow and Mr Greenspan argued that the bill would be counter-productive because it would make it politically more difficult for China to act.
In an interview on Wednesday, Mr Graham said that the White House went "bonkers" after an April procedural vote in which an unexpected 67 senators expressed support for the bill, and that it had asked the senators to delay a vote.
"There is a good faith on both sides now that might develop into something of substance," Mr Graham said.
The debate over the renminbi will be fuelled by news that China's foreign exchange reserves increased by more than Dollars 100bn in the first six months of this year to Dollars 711bn (Euros 588bn, Pounds 405bn).
LOAD-DATE: July 14, 2005
July 15, 2005 Friday
London Edition 2
SECTION: THE AMERICAS; Pg. 8
LENGTH: 500 words
HEADLINE: China 'is planning to revalue its currency' TREASURY SECRETARY:
BYLINE: By ANDREW BALLS, RICHARD MCGREGOR and DEMETRI SEVASTOPULO
DATELINE: WASHINGTON and BEIJING
BODY:
The Bush administration has told key senators that it expects China to revalue its currency in August ahead of a planned visit to Washington by President Hu Jintao in September, according to people familiar with the matter.
Senators Charles Schumer and Lindsey Graham, co-sponsors of a bill that would impose a 27.5 per cent tariff on Chinese imports, agreed to delay a vote on their bill after receiving what they regarded as an assurance that China would move on its currency next month.
John Snow, the Treasury secretary, told the senators in a meeting at the end of June that he believed China would move to allow the value of the renminbi to increase against the dollar in August, the people familiar with the discussion said.
That assurance, which came in a meeting with Alan Greenspan, the Federal Reserve chairman, persuaded the senators to postpone the vote on legislation that threatens trade sanctions against China.
"Senator Graham and I believe that the administration is convinced that China will begin a revaluation process this summer, forced by our bill's success in the Senate," Mr Schumer said.
While the senators have agreed to postpone the vote for now on the basis of the administration's assurances, inaction by China would probably produce even stronger support for trade sanctions in the Senate.
In private contacts, the US Treasury has told Beijing that it needs to revalue the renminbi by at least 10 per cent against the dollar to prevent protectionist legislation in Congress.
The renminbi has been pegged to the dollar for the past decade. China is considering a currency regime similar to the managed float operated by Singapore.
Under this system, the renminbi would be pegged to a basket of currencies reflecting the country's trade, but details of the weights of the basket would not be made public, a person familiar with China's thinking said.
Tony Fratto, US Treasury spokesman, said: "Secretary Snow did not provide an assurance on a specific time-frame for when China would reform its currency regime. Targeting a specific date or time-frame is counter-productive.
"That said, it is clear that China is prepared to move now. It would be in the best interests of China, and the global financial system, if these reforms came sooner rather than later."
At the meeting with the senators, Mr Snow and Mr Greenspan argued that the bill would be counter-productive because it would make it politically more difficult for China to act.
In an interview on Wednesday, Mr Graham said that the White House went "bonkers" after an April procedural vote in which an unexpected 67 senators expressed support for the bill, and that it had asked the senators to delay a vote.
"There is a good faith on both sides now that might develop into something of substance," Mr Graham said.
The debate over the renminbi will be fuelled by news that China's foreign exchange reserves increased by more than Dollars 100bn in the first six months of this year to Dollars 711bn (Euros 588bn, Pounds 405bn).
LOAD-DATE: July 14, 2005
posted by Eastlaw at Friday, July 15, 2005
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