U.S. makes toughest warning to China yet

Treasury says Beijing will be named manipulative trading partner if yuan isn't more flexible.

May 17, 2005: 2:46 PM EDT


WASHINGTON (Reuters) - The United States told China Tuesday it will be named a manipulative trading partner unless it moves fast to make its currency more flexible, Washington's toughest warning to Beijing on the issue yet.

While the U.S. Treasury, in its semiannual report on currency practices of trading partners, said no country was currently gaining an unjust trade edge by keeping its currency artificially low, China came in for pointed criticism.

"If current trends continue without substantial alteration, China's policies will likely meet the statute's technical requirements for designation," the Treasury report said.

"Current Chinese policies are highly distortionary and pose a risk to China's economy, its trading partners and global economic growth," it said.

The report to Congress -- hotly awaited by lawmakers and financial markets -- comes as anger mounts on Capitol Hill over China's practice of pegging its currency at about 8.28 to the dollar.

U.S. exporters claim the yuan is as much as 40 percent undervalued, making Chinese goods unfairly cheap.

The report was likely to fuel growing calls on Capitol Hill to take steps to slow cheap Chinese imports that U.S. producers claim have cost tens of thousands of American jobs and shuttered plants in industries from textiles to toymaking.

What does China have to say about the yuan revaluation?

Senators say Treasury report on China's currency not 'tough' enough, Reuters reports. More soon.