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U.S. Pressures China to Appreciate Yuan.

Posted June. 26, 2003 21:29,   


While, all three biggest economic powers, United States, Japan and the European Union, are promoting the manufacturing industry by devaluating their currencies, China`s Yuan exchange policies, where Yuan is virtually pegged to U.S. dollars, is becoming a target for a trade dispute.

According to a Chinese daily newspaper, the `coalition for sound dollar` held a meeting yesterday and is planning to file a suit under the violation of Section 301 of the Trade Act for China`s currency manipulation.

to force China to reconsider its foreign exchange policies.

The coalition for sound dollar, US group of about 80 manufacturers in areas such as metals, automobiles, textile is considering urging the White House to push China to allow the yuan to appreciate.

“In recent a few years, China`s economy grew at the average of 8% per year, so it is reasonable that the value of Yuan be raised more than the U.S., E.U. and Japan`s currency but China`s government "manipulate" its currency to keep the yuan artificially low,” the coalition claimed.

According to Section 301, if the US trade representative confirms that some countries have implemented unfair, unreasonable or discriminatory legislation or policies that are harmful the US government can take retaliatory measures.

China recorded the a trade surplus of enormous 103.1 billion dollars on the U.S last year, and boasts about its the world largest foreign currency possession but China is not giving up the peg system which pegs the Chinese currency in between 8.276 yuan and 8.3 yuan to the US dollar. The dollar has fallen about 12 pct against the euro this year and more than 20 pct in the last 12 months, sending the Chinese currency down in value as well. Vargo estimates the Chinese currency is undervalued as much as 40 pct.

U.S. Department of Finance, in particular, is promoting market conditions for U.S. manufacturing industry, but U.S. manufacturing industry has strongly been complaining of the China`s peg system as it has no advantage for U.S.-China trade for them.

In addition to it, recent depression of U.S. dollars, caused the yaun to be weakened, and it made Asian countries such as Japan and Korea more difficult to export in China as well as in the other countries.

The Chinese authorities is responding to the pressure for appreciating the yuan, saying “it reflects the current economic fundamental circumstances of China,” but experts believe China will appreciate the yuan a little in within a year considering its upgraded and growing international reputation,.

Rae-Jeong Park ecopark@donga.com