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China urges US to stymie "protectionist" FX bill

12 October 2011 12:18 (UTC +04:00)

Baku - APA-Economics. China urged the Obama administration to block a U.S. bill aimed at pressing Beijing to lift the yuan’s value, raising the risk of further strains between the world’s top two economies even if warnings of a "trade war" remain just talk, APA reports citing Reuters.

Washington’s effort to force Beijing’s hand may have the opposite effect, at least for now. Currency investors are already pricing in the risk that China could tighten its leash on the yuan to demonstrate its grip over the currency.

The bill is a protectionist step that "gravely violates World Trade Organization rules," Foreign Ministry spokesman Ma Zhaoxu said after the U.S. Senate approved it in a 63-35 vote and sent it to House of Representatives.

"China urges the U.S. government, Congress and all quarters to resolutely oppose using domestic legislation to create a fuss about and put pressure on the renminbi exchange rate," said Ma in comments on the ministry’s website (www.mfa.gov.cn).

The "renminbi", or "people’s currency," is another name for China’s yuan currency. The legislation will "disrupt the shared efforts of China and the United States, as well as the international community, to promote vigorous recovery and growth in the global economy," said Ma.

His condemnation was echoed by China’s Ministry of Commerce and the People’s Bank of China, the central bank, which said the yuan exchange rate was "reasonable." Chinese officials and media have warned that the legislation could trigger a "trade war" of escalating protectionist tit-for-tat retaliation.

China’s official Xinhua news agency said on Wednesday that "what the U.S. Senate did planted a ticking time-bomb that may ignite a potential trade war."