State Department officials and financial regulators shrugged their shoulders in response to the Tuesday devaluation of China’s currency, as top lawmakers urged the administration to sanction Beijing.
State Department spokesperson Mark Toner said Tuesday afternoon that “we have seen progress” in China’s orientation toward letting foreign exchange markets determine the value of the yuan, while an unnamed Treasury Department spokesperson told The Wall Street Journal that it was “too early to judge” the move.
“China has indicated that the changes announced today are another step in its move to a more market-determined exchange rate,” the spokesperson said.
Senators from both parties, however, immediately decried China’s announcement and the administration’s response, noting, as they often do, the benefit an artificially weak currency confers upon Chinese exports.
“Today’s news that China has yet again lowered the value of its currency is another harsh reminder that we cannot afford to sit idly by as China refuses to play by the rules,” Sen. Rob Portman (R-Ohio) said. He also stated that “the Administration’s refusal to take on China’s currency manipulation is enabling Chinese workers to have an unfair advantage over Ohio workers.”
Sen. Chuck Schumer (D-N.Y.) responded to the news by saying China’s policies should disqualify the yuan “from consideration as a global reserve currency by the IMF.”
“For years, China has rigged the rules and played games with its currency, leaving American workers out to dry,” he remarked. “Rather than changing their ways, the Chinese government seems to be doubling down.”
Sen. Lindsey Graham (R-S.C.) took to Twitter to decry the devaluation as a “provocative act…just the latest in a long history of cheating #China.”
“From currency manipulation to cyber attacks, @POTUS seems unwilling to stand up to the Chinese,” the Republican presidential candidate added. “As POTUS, that’s exactly what I’ll do.”
China’s central bank had announced Tuesday that it was allowing the value of the yuan to fall by 2 percent. It described the action as a “one-off depreciation” that actually better accounts for market forces. In recent months, the country has been plagued by profound financial instability, and observers have predicted that its next recession will have wide-ranging implications.
In May, while the Senate was debating granting President Obama with trade promotion authority, Portman proposed an amendment that would have made “a principal negotiating objective of the United States to address currency manipulation in trade agreements.” The measure failed in a 48-51 vote. Both Sens. Schumer and Graham supported it. Opponents said the legislation would have effectively killed the nearly-finalized Trans-Pacific Partnership. On Tuesday, Portman again pushed his once-failed initiative saying that “any negotiations on the Trans-Pacific Partnership must prioritize combatting currency manipulation by our foreign competitors.”
China is not party to TPP negotiations, but could eventually seek to join the free trade zone, should it be created.
The last time the US considered China to be a currency manipulator was 1994. When the Treasury Department issued a report in 2012 calling the yuan “significantly undervalued,” Sen. Schumer scoffed at its conclusion.
“This report all but admits China’s currency is being manipulated, but stops short of saying so explicitly,” he said. “The formal designation matters because there can be no penalties without it. It’s time for the Obama administration to rip off the Band-Aid, and force China to play by the same rules as all other countries.”
