Treasury Department's report says it will 'actively and frankly' push Beijing towards faster currency reform.
May 10, 2006: 5:44 PM EDT
WASHINGTON (Reuters) - The Treasury Department ruled on Wednesday that China was not a currency manipulator but pledged to "actively and frankly" push Beijing toward faster exchange-rate flexibility that would let its yuan rise in value.
Treasury Secretary John Snow said that currency values should be set on open markets and the decision not to cite China as a currency manipulator was based on a careful reading of the law.
"We think free and open markets should be allowed to set value," Snow told a news briefing.
"We did what we did because we are trying to apply the statue as we read it," he said, referring to a semi-annual report on the global economy, released earlier on Wednesday.
The Treasury stopped short of naming China as a currency manipulator in the report, but said it would keep up pressure on Beijing to improve yuan flexibility -- code for letting it rise in value.
Treasury's decision was certain to anger lawmakers who claim China is dragging its feet deliberately while flooding U.S. markets with cheaply priced goods, but Treasury said Beijing was moving, albeit too slowly, on currency reforms.
"Given our strong disappointment and the importance of China to the world economy, the Treasury Department will closely monitor China's progress in implementing its economic rebalancing strategy...and continue actively and frankly to press China to quicken the pace of renminbi flexibility."
China's yuan currency is also known as the renminbi.
The Treasury ruling was in its twice-a-year report to Congress on currency practices of key trade partners.
After the ruling, two U.S. senators who have criticized China's forex policy said that they would not seek punitive trade legislation against Beijing before Sept. 30 in order to give China more time to improve.
"If we don't have action by Sept. 30, we're going to vote and it will unleash forces that I think need not be unleashed," said Sen. Lindsey Graham, a South Carolina Republican.
Sen. Charles Schumer, a New York Democrat, said, "We're willing to give them a chance."