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Everybody knows China manipulates currency... except the U.S.
Treasury. They didn't get the memo. Treasury must issue
reports each year identifying currency manipulation, and, by golly, has
never found it. No matter how hard they look.
Odd language though, because it looks like they found currency rates set by the Chinese government:
In the report, the Treasury Department said, “China needs to
intensify its efforts to rebalance its economy” by bolstering domestic
demand to reduce reliance on imports and by changing its financial
system to let the yuan’s foreign exchange value be set by the markets
rather than by the government.
Maybe someone can tell me the distinction between "foreign exchange
value... set by the ... government" and currency manipulation.
I'm not smart enough to get it. Looks like cheating to me.
This came in an email to me today on the topic
For
the next to last time, the Bush Treasury has declined to cite China, or
any other mercantilist country, as a currency manipulator.
According to press reports, Its latest report was sent to Congress
yesterday.
Three observations:
* Like NAM and other apologists for the status quo, Treasury
derives a figure of 18.4 percent for the nominal appreciation to
date. That is accurate but misleading, especially when compared
to the usual 40 percent revaluation goal. They do so by measuring the
change in US cents for the value of one renminbi; in those terms the
renminbi would have to rise by well over 50 percent to reach the same
level as our 40 percent target for RMB per dollar. When
calculated in terms of the change in the number of RMB per dollar, the
figure for the nominal appreciation to date is lower -- about 15
percent from the pre-July 2005 level. When corrected for
inflation (something we hope the CCC will be able to do soon), the
effective change is even smaller. By inlfating the progress,
Treasury simply calls more attention to the failure of its diplomatic
efforts.
* Treasury looked at an earlier period and thus did not have
to deal with the recent "stalling" in the rate of appreciation, as
reported in the Financial Times of May 12. This morning the RMB
trraded at 6.99100 to the dollar; a month ago on April 15 the rate was
6.99250. No matter how you slice that, the appreciation process
has in fact stalled.
* All this goes to show that Treasury has neither the will
nor the means to persuade China (or any other mercantilist) to live up
to IMF Article 4 obligations.
If this were just a game, we might say that Ways and Means punted
in its March letter when it was only second down and five to go.
Now Treasury on the first play from scrimmage has quick kicked.
The ball lies on the ground downfield. Will anyone pick it up and
run?
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