Ways and Means Chairman Sander M. Levin today announced a full committee hearing to consider whether China’s June announcement to allow exchange rate flexibility has led to material appreciation of the renminbi (RMB). The hearing will take place on Wednesday, September 15, 2010.
“China’s currency policy is central to the trade imbalance that is destroying North American industries and jobs,” said USW International President Leo W. Gerard. “We commend Congressman Levin’s leadership in calling this hearing to examine this issue.”
In addition, the Committee will hear testimony as to whether Congress or the Administration should take action to address China’s unfair currency policy and its impact on U.S. businesses and workers.
“There is no real question that China’s deliberately undervalued exchange rate is unfair, contributes to global trade imbalances, and costs the United States jobs and economic growth, particularly in the manufacturing sector,” said Chairman Levin. “We must ensure that China’s rhetoric translates into results that are meaningful and that the international trading system ensures fair rules of competition.”
While there is now a growing recognition that China’s deliberately and substantially undervalued currency contributes to global economic imbalances and impedes economic recovery and job creation, the issue itself is not new. The United States has been pressing China to allow the RMB to appreciate for more than seven years.
Six years ago, the Treasury Department expressed concern when China’s foreign exchange reserves (accumulated as a result of its currency market interventions) rose to $346 billion. Today those reserves exceed $2.4 trillion. And, according to some recent estimates, the RMB may be undervalued by between 25 and 40 percent against the dollar.
China allowed the RMB to appreciate somewhat beginning in July 2005, but China halted appreciation during the summer of 2008, when the global economic crisis caused China to redouble its efforts to stimulate exports. On June 19, one week before the G-20 Summit in Toronto, China announced that it would allow flexibility in its exchange rate.
But as of today, the RMB has appreciated less than one percent against the dollar. China recently announced that its trade surplus grew by 44 percent in June (compared to June 2009); while the United States recently announced that the U.S. trade deficit in May grew by 4.8 percent -- with the bilateral trade deficit with China growing by 15 percent.