By Zhou Xin and Doug Palmer
BEIJING/WASHINGTON, Sept 30 (Reuters) - China on Thursday
hit back at a bill passed by the U.S. House of Representatives
aimed at pressuring Beijing to let its currency rise faster by
branding it in violation of world trade rules, but Beijing
stopped short of threatening any retaliatory actions.
China's tight leash on the yuan is under intense scrutiny
as countries around the world look to export their way back to
economic health, raising concerns they will intentionally
weaken their currencies to gain an edge.
The bill allows the U.S. Commerce Department to treat
"fundamentally undervalued currencies" as an illegal export
subsidy so that U.S. companies can request a countervailing
duty to offset China's price advantage.
In response, the official Xinhua news agency quoted China's
commerce ministry spokesman, Yao Jian, as saying: "Starting a
countervailing investigation in the name of exchange rates does
not conform with relevant WTO rules."
The lawyer-like statement was a measured response compared
with China's reactions in other disputes this year, including
U.S. weapons sales to Taiwan, when Beijing froze military
contacts with the United States.
"I don't think China will have any dramatic reaction to
this bill's passing," said Jin Canrong, a professor of
international relations at Renmin University in Beijing, who
specialises in U.S.-China relations. "China wants to preserve
the stability of overall relations."
The bill would need to be passed by the Senate -- far from
certain -- and signed by President Barack Obama to become law.
The American Chamber of Commerce in China voiced its
opposition to the Chinese currency legislation in an email,
saying "if enacted into law, the chamber does not believe the
bill will be effective in achieving its objectives and would
fail to create significant U.S. job growth".
LOWER YUAN MIDPOINT
China's central bank fixed the yuan's daily mid-point
versus the dollar at a weaker level on Thursday.
Ahead of the U.S. vote, the People's Bank of China had said
China would increase the flexibility of the yuan and improve
the way it manages the exchange rate with reference to a basket
of currencies of the country's trading partners.
The PBOC issues mid-point data through the Shanghai-based
interbank market, the China Foreign Exchange Trade System
(CFETS), on the market's website, www.chinamoney.com.cn. The
yuan may rise or fall 0.5 percent against the dollar from its
mid-point each day.
Despite the weaker mid-point, the yuan has now gained
almost 2.2 percent against the dollar since Beijing scrapped a
23-month-old peg to the dollar on June 19 and said it would let
the currency resume a managed float. Nearly all of the increase
has occurred this month.
The bill could fan the flames of a long-running dispute
with China over trade and jobs.
It passed with solid bipartisan support just over a month
ahead of mid-term elections as voters focus on the
still-struggling U.S. economy and persistently high
Many lawmakers both in the House and the Senate have
complained for years that China's policies create an unfair
trade advantage, but this is the strongest step yet.
The bill passed by a vote of 348-79.
Any vote in the Senate, however, won't come until after
congressional elections on Nov. 2 when the U.S. political
landscape could be greatly changed.
"China's persistent manipulation of its currency
contributes to the outsourcing of American jobs and poses a
very serious problem that requires real action," said House
Ways and Means Committee Chairman Sander Levin.
QUICK YUAN MOVES UNLIKELY
Chinese analysts were skeptical that the legislation would
produce any quick movement on the yuan.
"This is not something like, 'I will do something since you
have threatened me,'" said Zuo Chuanchang, a researcher with a
think tank under China's National Development and Reform
"If you are looking for another one-off revaluation of 3 to
5 percent, or are expecting a 20 percent rise in the yuan over
a year ... forget it," added Fu Bingtao, an economist with the
Agricultural Bank of China.
Before the House vote, China's central bank reaffirmed its
pledge to increase the flexibility of the yuan and improve the
way it manages the exchange rate.
Obama and Chinese Premier Wen Jiabao talked about China's
currency and huge trade surplus with the United States on the
sidelines of the U.N. General Assembly last week.
China, the largest foreign buyer of U.S. government debt
with holdings of nearly $847 billion as of July, also says its
big trade surplus with the United States is due to Americans
saving too little and no longer making the goods that China
While Obama has not taken a position on the legislation,
House Majority Leader Steny Hoyer said lawmakers worked with
the White House to ensure the bill did not violate WTO rules.
Treasury Secretary Timothy Geithner told Congress two weeks
ago that Washington would work with Group of 20 nations to push
China for faster appreciation, but several allies expressed
reluctance to join the effort. G20 leaders are set to meet in
Seoul on Nov. 10-11.
China and the United States have a difficult but vital
diplomatic relationship, not least in dealing with nuclear
threats from Iran and North Korea.
In recent months, Washington and Beijing have also sparred
over Chinese government procurement policies, Internet
censorship, U.S. arms sales to Taiwan and U.S. sympathy for the
Dalai Lama, the exiled Tibetan spiritual leader.
(Additional reporting by Matt Spetalnick in Des Moines, Iowa,
and Susan Cornwell, Paul Eckert and Emily Kaiser in Washington;
Chris Buckley in Beijing; and Lu Jianxin and Karen Yeung in
Shanghai. Writing by Nick Macfie and Don Durfee; Editing by Ken
Wills and Sanjeev Miglani)