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China Currency Announcement
a "Small Step," says Service Center President

China Currency Announcement
a "Small Step," says Service Center President

Wednesday, July 27, 2005
 
Regarding China’s announcement that it will float its currency within a narrow range as a response to international monetary markets, M. Robert Weidner III, president and CEO of the Metals Service Center Institute, calls it “a first, very small step toward the flexible market-based exchange-rate system that we and many others have advocated. (But it) does not go nearly far enough to respond to our concerns about the impact of Chinese currency manipulation on the North American manufacturing economy.” In making his argument, Weidner cites studies showing that the Chinese yuan has been undervalued by as much as 40 percent. He criticizes as inadequate the Chinese decision to value the yuan at 8.11 to the U.S. dollar from a previous value of 8.28. “Furthermore, a 0.3-percent defined-band trading range does not constitute a significant movement toward a flexible foreign-exchange-market valuation,” he says, calling that merely a decision by the People’s Bank of China to offer a China-managed exchange system in an attempt to reduce political pressure on that country. As a solution, Weidner advocates passage of H.R. 1498, the China Currency Act of 2005, bi-partisan legislation that defines currency manipulation and makes it actionable under U.S. trade law.

 

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