U.S. Treasury Department Declines To Label China As A Currency Manipulator, Wednesday, June 13, 2007 11:13:05 AM

The U.S. government once again did not label China a currency manipulator on Wednesday, disappointing some critics who say the country is taking advantage of an unfair exchange rate. Still, the Treasury Department criticized China`s intervention into the currency markets and encouraged the country to allow a more free exchange.

In its semi-annual currency report, the U.S. Treasury Department stated that China does not meet the technical requirements for designation as a currency manipulator. However, the agency stated that China`s central bank has engaged in heavy intervention in the foreign exchange market, leading to excessive accumulation of foreign exchange reserves. Another consequence of China`s policy has been a quick increase in domestic liquidity, which raises the risk that the country`s economy will overheat and form asset bubbles.

The U.S. report also criticized China for allowing its economy to become severely unbalanced. The report pointed out that the Chinese economy has become dependent on exports and investment. Also, the situation in China is characterized by very high savings, weak consumption and inflexible exchange rates.

The Treasury Department argued that allowing the Chinese currency to adjust was a matter of international `responsibility.` The report stated that China should stop hesitating to take `far more vigorous action` to bring its economy more into balance and promote immediate movement in its currency.

Even with this criticism, the U.S. stopped short of naming China a currency manipulator. The Treasury Department said it could not determine that China`s exchange rate policy was aimed at gaining an unfair competitive advantage in international trade. The Treasury also concluded that no other major U.S. trading partner was guilty of manipulating currencies.

Copyright © 2007 RTTNews.com. All Rights Reserved.