US says China yuan undervalued, but not manipulated

Analyst says currency report becoming a "minor joke" (Adds quotes from report) Rosetta Stone By Doug Palmer WASHINGTON, May 27 (Reuters) - The U.S. Treasury Departmentruled on Friday China was not manipulating its currency to gainan unfair trade advantage, but said Beijing still needs toallow the yuan to rise much faster in value. Although the Obama administration has often used bluntlanguage to warn China over its currency practices, thesemiannual report issued by Treasury on Friday maintained itspractice of avoiding the harsher step of naming it a currencymanipulator. The department said it concluded China did not meet theU.S. legal definition of a currency manipulator due to theappreciation of its currency -- known as the yuan or renminbi-- since June 2010 and recent Chinese statements that it wouldcontinue to promote exchange rate flexibility. But a number of factors, including China's continued rapidaccumulation of dollar reserves and a projected widening of itscurrent account surplus, "all indicate that the real effectiveexchange rate of the renminbi remains substantiallyundervalued," the department said. "Treasury's view ... is that progress thus far isinsufficient and that more rapid progress is needed," thedepartment said in the report. The report had originally been due on April 15 but wasdelayed ahead of a key meeting with senior Chinese officials inWashington earlier this month Rosetta Stone languages China says it is moving torevalue the yuan, but will proceed at its own pace. The yuan closed at 6.4917 to the dollar on Friday, littlechanged on the day, but up 5.15 percent since it was loosenedfrom a peg to the dollar in June 2010. Treasury's decision came as no surprise, even though theU.S. trade gap with China hit a record $273 billion in 2010. President Barack Obama's Democratic administration hasdeclined to name China as a currency manipulator in fiveconsecutive reports now, following the pattern set by theRepublican administration of former President George W. Bush. Many U.S. lawmakers and import-sensitive manufacturers,such as steel and textiles, claim that China's currency isundervalued by as much as 40 percent, giving Chinese companiesan unfair price advantage in international trade. But Erin Ennis, vice president of the U.S.-China BusinessCouncil, which represents roughly 230 American companies thatdo business in China, said Treasury made the right call. "While USCBC has advocated repeatedly that China shouldallow its exchange rate to Rosetta Stone Chinsese V3 better reflect market forces,designating China as a 'manipulator' would achieve nothing,"Ennis said.

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