U.S. Chamber Of Commerce Has Warning For China

Obama administration under increasing pressure to declare Beijing a currency manipulator, which could set the stage for complaint to WTO and sanctions on Chinese goods.

BEIJING (AP) -- The U.S. Chamber of Commerce warned China against protectionist economic policies Thursday, saying pressures are growing in the United States during an election year to retaliate with measures of its own.

"Put simply, ongoing policy approaches by China are eroding the support of China's long-standing advocates in the United States, diminishing the many good arguments we have used historically in support of this relationship," Myron Brilliant, the senior vice president for international affairs for the U.S. Chamber of Commerce, told a conference Thursday in Beijing.

The Obama administration is under increasing pressure from some in Congress and the business community to declare Beijing a currency manipulator in a report due out in April. That could set the stage for a complaint to the World Trade Organization and possible sanctions on Chinese goods.

China denies that its currency is deliberately undervalued to give Chinese exports a competitive advantage in world markets. Its commerce minister has warned that China would retaliate against any such measures by the United States, and a Foreign Ministry spokesman has said U.S. calls for yuan appreciation are a "bad example of protectionism that is detrimental to the recovery of the world economy."

But currency is just one of the concerns, Brilliant said. He mentioned long-running concerns over protection of intellectual property and the growing issue of China's push for "indigenous innovation," which some foreign businesses worry will restrict their access in China.

"China's intensifying regulatory approach of shielding domestic companies from competition and restricting the market access of foreign companies is calling into serious question the long-term place of foreign investors in many sectors of its economy as well as the role of market competition in promoting innovation," he said.

The United States is expected to make the currency issue a priority when U.S. Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner lead the U.S. delegation to the latest version of the twice-yearly Strategic and Economic Dialogue in China in late May.

China's central bank governor, Zhou Xiaochuan, said this month that currency measures would be withdrawn "sooner or later" but said Beijing will act cautiously because the global economic outlook is still uncertain.

Beijing broke its currency's link to the U.S. dollar in 2005 and allowed it to rise by about 20 percent through late 2008. But it has been frozen since then in what was seen as an effort by Beijing to keep its exporters competitive as global demand plunged.

Many analysts expect China's government will gradually allow the yuan to gain no more than 5 percent against the dollar this year while maintaining exchange rate controls. However, some speculate Chinese leaders might delay acting because they don't want to be seen as giving in to American pressure.

"If China were to revalue its currency by 25 percent, that would be a significant gesture," Brilliant said Wednesday, but added the move wouldn't solve everything.

"What we don't want is the U.S. taking protectionist actions," he said.

At a regular press briefing Thursday, Chinese Foreign Ministry spokesman Qin Gang addressed the tensions.

"We believe there have been some frictions in the China-U.S. trade and economic relations. But we should attach importance to the approach of how to resolve those disputes," he said. "Partners are better than adversaries. This has been repeatedly proven by past experience."

More in Supply Chain