US Senate approves bill targeting yuan
13 Oct 2011
The US Senate yesterday passed a legislation targeting China's management of its currency, the yuan, a move that raised hackles in China and underlined US frustration with one of its largest trading partners.
Analysts say, though the bill would probably not become law, the Senate debate served to highlight the growing concerns over the issue as the two countries had not been able to resolve their differences over China's control of the yuan.
In a recent development, the Chinese central bank's intervention in currency markets pushed up the value of the yuan, which was in line with US interests.
A bipartisan group of 63 lawmakers voted favouring a legislation aimed to pressure White House to more levy tariffs and other penalties against countries with "misaligned" currencies.
The bill received a thumbs down from 35 lawmakers. The bill seeks to help US firms, that argue that Beijing's policy of holding down the value of the yuan serves to bolster China's exporters by acting as a trade subsidy. The bill's opponents argue that if the bill were to become law a trade war could be sparked by any retaliatory action from Beijing.
Though the legislation enjoys wide support in the House, Republican House leaders seem to have little interest in scheduling a vote. Majority leader John Boehner (R, Ohio) describing the move "dangerous," and insisted he would resist pressure for a House vote.
Meanwhile China has criticised the bill as a threat to a shaky global economic recovery and warned today that trade ties would be "severely damaged" if it were to become law.
Rejecting the measure by the Senate, China said it was a form of protectionism at a time when other nations were trying to sustain free trade. The bill would allow US to raise tariffs on Chinese imports that, according to critics were unfairly cheap due to Beijing's exchange-rate controls.
