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China: US Currency Bill Will Damage Global Economy

Beijing rejected the measure as a form of damaging protectionism at a time when other nations are trying to sustain free trade.

BEIJING (AP) -- China criticized an American currency bill as a threat to a shaky global economic recovery and warned Wednesday that trade ties will be "severely damaged" if it becomes law.

Beijing rejected the measure passed Tuesday by the Senate as a form of damaging protectionism at a time when other nations are trying to sustain free trade. The bill would allow Washington to raise tariffs on Chinese imports that critics say are unfairly cheap due to Beijing's exchange-rate controls and are destroying U.S. jobs.

"It is completely harmful and unbeneficial," said Foreign Ministry spokesman Ma Zhaoxu in a statement. Ma said it would do nothing to reduce U.S. unemployment and would disrupt global efforts to revive economic growth.

Tuesday's 63-35 Senate vote showed a bipartisan consensus in favor of tougher action against Beijing after years of diplomatic pressure and a gradual rise in China's currency, the yuan, that critics say is inadequate.

Still, the bill is unlikely to become law because it lacks the support of the majority Republican leadership in the lower House of Representatives, who are reluctant to take up the measure. The White House and President Barack Obama have not come out against the bill but have shown they are uncomfortable with it.

U.S. manufacturers complain that Beijing's controls keep the yuan undervalued by up to 40 percent. They say that gives China's exporters an unfair price advantage and hurts foreign competitors, eroding American employment. The currency bill's supporters say it would support creation of 1 million jobs in the United States.

American critics of the bill have warned Beijing might retaliate, hurting U.S. companies in China's relatively robust markets, which are a rare bright spot for exporters amid weak demand elsewhere.

If it becomes law, "Sino-U.S. economic and trade relations will inevitable be severely damaged," Commerce Ministry spokesman Shen Dayang said in a statement.

Some opponents of the measure argue that currency sanctions would do little to help the U.S. job market because Chinese goods would simply be replaced by goods from other low-wage countries such as Vietnam and Bangladesh.

Ma, the Foreign Ministry spokesman, said the measure violates World Trade Organization rules.

"It not only cannot solve the problems in the U.S. economy or unemployment, but will seriously impede Sino-U.S. economic and trade ties and impede the joint efforts that China, the U.S. and the international community have made to enable a strong recovery and the growth of the global economy," Ma said.

The officials gave no details of a possible response but have warned in the past that unilateral trade action could damage the full array of U.S.-Chinese cooperation. That ranges from efforts to protect U.S. intellectual property rights in China to assuring the security of Taiwan and keeping the Korean Peninsula peaceful.

The American Chamber of Commerce in China also criticized the bill as a threat to trade and financial relations. It appealed to U.S. lawmakers to focus instead on efforts to promote market access and strengthen Chinese protection of intellectual property.

"The Senate bill would damage the bilateral trade and investment relationship, weaken our standing in the World Trade Organization, and damage our national interests," said the group's chairman, Ted Dean. "We oppose it. It should not become law."

The currency legislation would set in motion the imposition of higher tariffs on a country if the U.S. Treasury Department decides its currency is "misaligned" and the country does not act to correct it. Currently, Treasury must resolve that a country is willfully manipulating its currency, a higher bar to reach, before sanctions can be considered.

The bill also makes it easier for specific industries to petition the Commerce Department for redress if they believe an exchange rate is giving a foreign competitor the equivalent of an export subsidy.

Beijing has said repeatedly it is pushing ahead reforms of its exchange rate controls but says it will set the pace. Chinese leaders have warned that an abrupt rise in the yuan could lead to job losses and fuel unrest.

The yuan's value has been allowed to rise by about 5 percent against the dollar over the past year in tightly controlled trading. The rise has quickened in recent weeks.

On Wednesday, China's central bank issued a statement defending its currency controls as an "important contribution" to international financial stability.