Obama urges Wen to act over renminbi

Financial Times:

As Congress prepared to vote on legislation to allow the US to punish China for allegedly undervaluing the renminbi, Mr Obama told Mr Wen that currency policy was “the most important issue” in their discussion, administration officials said.

Jeff Bader, Mr Obama’s senior Asia adviser, said the US was “disappointed that there had not been much movement” since China’s decided to remove a currency peg in June. He said: “this had consequences for the global economy and for the US economy and we look to see more rapid and a significant revaluation in the months to come”.

Speaking on Thursday, after the leaders two-hour meeting on the margins of the UN general assembly, Mr Bader added: “This was a conversation in which the two sides agreed that we have substantial common interests and we wanted to have a candid discussion about the differences.”

Asked to characterise China’s response to the US demands, Mr Bader said Mr Wen had reiterated China’s intention to continue with reforming its exchange rate mechanism.

But at Mr Wen had earlier told businessmen in New York that China would resist US pressure for a revaluation while adding that the dispute should not be allowed to disrupt relations.

Mr Wen said a 20 per cent appreciation of the renminbi would cause job losses and bankruptcies in China without creating jobs in the US. “The conditions for a major appreciation of the renminbi do not exist,” he said.

But Mr Wen also said the two countries were partners. “We don’t have any reason to let our relationship back-pedal.”

Mr Bader said Mr Wen was “well aware” of Congress’s attitude on the Chinese currency and hinted that the administration could take action against Beijing if its economic concerns were not met.

US legislation due to go to a vote of the full House of Representatives next week would allow estimates of currency undervaluation to be used to calculate “countervailing duties” against imports that were deemed to be state-subsidised.

Nancy Pelosi, the House speaker, said this week it was time to give the White House leverage in its negotiations with the Chinese government.

“If China allowed its currency to respond to market forces, it could create a million US manufacturing jobs and cut our trade deficit with China by $100bn a year, with no cost to the US Treasury,” she said.

Pointing to recent World Trade Organisation litigation the US has pursued against China, Mr Bader warned that the US could take further action. “If the Chinese don’t take action, we have other means of protecting US interests,” he said