On the campaign trail, Mitt Romney has pledged to label China a currency manipulator if he becomes president. He has also criticized Obama for not being sufficiently aggressive in confronting Beijing on the currency issue. President Obama has filed six complaints with the WTO regarding Chinese trade practices, only one less than the previous President Bush during his entire tenure. Many observers see this as election year rhetoric, and expect Romney’s position to soften were he to win the White House.
The Yuan has appreciated 23 percent in the past five years and recently the People’s Bank of China has raised the trading Yuan trading band to 1 percent from 0.5 percent (established in 2007). Last December, the Congressional Research Service reported that the Chinese currency remains undervalued by 12 percent. A Bloomberg study concluded that the US/China deficit would be cut in half by 2014 were the Yuan to appreciate at an anual rate of 7 percent.
Figures on both sides of the aisle in Washington, including John Boehner and Tim Geithner, have warned that such labeling is potentially dangerous and risks triggering trade war retaliation from China.
Source: Bloomberg
