Posted by: Bruce Einhorn on February 25, 2010
While Democrats and Republicans squabbled about health care on Thursday at Blair House (corrected - I originally wrote White House but the meeting was at the president’s guest house across the street), 15 senators—from both sides of the aisle—managed to find common ground on a different issue: China. They even put a health-care spin on the problem. “China’s mercantilist policies are undermining the health of many U.S. industries,” the lawmakers said in a letter to Commerce Secretary Gary Locke. “There can be no doubt that China’s policy of large-scale intervention in the exchange markets and the significant undervaluation of its currency acts as a subsidy to Chinese exports.”
The senators include Democrat Chuck Schumer of New York and Republican Lindsay Graham of South Carolina, who in the past have sought to penalize Beijing for keeping the yuan undervalued. They are asking the Obama administration to rule that “China’s policy of large-scale intervention in the exchange markets and the significant undervaluation of its currency acts as a subsidy to Chinese exports.” Till now, Obama has rebuffed such calls. But with midterm elections in November and U.S.-China tensions rising on a host of issues - the Taiwan arms sale, Obama’s meeting with the Dalai Lama, Internet censorship, and allegations (by both sides) of protectionism -the Chinese government shouldn’t count much longer on the President’s forbearance.
For more on China’s currency, check out this Asia Insight column on BusinessWeek’s Asia channel by Shaun Rein, who argues Beijing should resist calls for an immediate change from its weak-yuan policy.