Letter to Henry Paulson, Secretary of the Treasury, Re: Push the Chinese Government to Stop Manipulating its Currency

Letter

Stabenow, Colleagues to Administration: Push the Chinese Government to Stop Manipulating its Currency

On Eve of Latest Strategic Economic Dialogue with China, Bipartisan Group of Senators Urge Administration to Stand up for American Businesses, Workers

U.S. Senators Debbie Stabenow (D-MI), Jim Bunning (R-KY), Evan Bayh (D-IN) and Chuck Schumer (D-NY) along with a bipartisan group of Senators, including Senator Barack Obama, today sent the following letter to Treasury Secretary Henry Paulson urging the administration to push the Chinese government to stop manipulating its currency and to allow greater appreciation of the renminbi (RMB).

Currency manipulation is the practice by which the Chinese government achieves an unfair trade advantage by artificially lowering its currency's value providing a subsidy to Chinese firms, enabling them to undercut American businesses and workers.

The fourth round of the China-U.S. Strategic Economic Dialogue is being held in Annapolis, Maryland, tomorrow, June 17th and Wednesday, June 18th. The dialogue consists of two days of meetings between Treasury Secretary Henry Paulson, Chinese Vice Premier Wang Qishan, and other U.S. and Chinese government officials.

Full text of the letter follows:

The Honorable Henry M. Paulson, Jr.
Secretary of the Treasury
1500 Pennsylvania Ave.
Washington, DC 20220

Dear Mr. Secretary,

We write to urge you to push the Chinese government to stop manipulating its currency and allow greater appreciation of the renminbi (RMB) when you meet with Vice Premier Wang Qishan this week. The Chinese government continues to build its foreign exchange reserves, accumulating a record $228 billion in the first four months of this year, an amount nearly as much as the total growth between 2004 and 2006. China now holds $1.85 trillion of these reserves.

While the Chinese government points to a 19.8 percent nominal appreciation of the RMB against the U.S. Dollar since China ended the RMB's peg to the dollar in July 2005, the appreciation on a real trade-weighted basis is a smaller 13 percent, according to JP Morgan. And, the Bank for International Settlements calculates that, since February 2002, the RMB has actually depreciated 6 percent on a real trade-weighted basis. Indeed, many economic models show the RMB is still undervalued by as much as 40 percent. This misalignment contributes substantially to China's trade surplus with the U.S., which reached over $20 billion in April alone.

This lack of significant progress on the continuously misaligned RMB has substantial negative effects on American manufacturers. China's longstanding policy of undervaluing its currency—in violation of its IMF commitments—effectively gives an unfair competitive advantage of up to 40 percent to its, frequently state-run, firms. The unfair price advantage that the undervalued RMB gives Chinese firms has forced many American companies to declare bankruptcy or even go out of business, harming our workers, families, and middle class.

We believe American companies can compete with anyone in the world. However, they cannot compete effectively when their competitors are supported by other governments' deliberate policies that make their exports artificially cheaper. This is about taking a stand for American businesses, American workers, and American jobs. Mr. Secretary, we again urge you to press the Chinese to allow the level of the RMB to be determined by markets, not government interventions. When everyone plays by the same rules, our manufacturers can compete and thrive in the global economy. They cannot, however, afford further delay in addressing the misaligned RMB.

Sincerely,

Senator Debbie Stabenow (D-MI)
Senator Jim Bunning (R-KY)
Senator Evan Bayh (D-IN)
Senator Chuck Schumer (D-NY)
Senator Olympia Snowe (R-ME)
Senator Kent Conrad (D-ND)
Senator Sherrod Brown (D-OH)
Senator Sheldon Whitehouse (D-RI)
Senator Carl Levin (D-MI)
Senator Elizabeth Dole (R-NC)
Senator Barack Obama (D-IL)