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China: U.S. bill on yuan would hurt both countries

By Charles Riley, CNNMoney.com
U.S. President Barack Obama and Chinese Premier Wen Jiabao at the U.N. General Assembly Thursday in New York.
U.S. President Barack Obama and Chinese Premier Wen Jiabao at the U.N. General Assembly Thursday in New York.
STORY HIGHLIGHTS
  • Beijing responds after the U.S. House passes a bill to target manipulation of China's currency
  • China says protectionism would damage the economies of both nations
  • U.S. lawmakers say yuan manipulation costs Americans jobs
  • Without offering details, Beijing says it has been clear on possible retaliation
RELATED TOPICS
  • Barack Obama
  • Wen Jiabao
  • China

New York (CNNMoney.com) -- China on Thursday urged the United States to resist protectionism and avoid damaging both nations' economies, following the U.S. House's passage of legislation designed to combat Beijing's manipulation of currency.

"We firmly oppose the U.S. Congress approving of bill. Exercising protectionism only severely damages the relationship and have negative impact on both economies and the global economies," said Jiang Yu, spokeswoman for China's Ministry of Foreign Affairs.

"We have made our position clear to the U.S. side," she said, when asked whether China planned any retaliatory measures.

The House of Representatives approved the legislation on Wednesday, saying that China's moves result in unfavorable trade conditions for the United States.

The legislation, which authorizes the Commerce Department to impose duties on imports from countries with undervalued currencies, passed by a vote of 348-79.

The bill received support from both sides of the aisle, a rarity in recent sessions, with Democrats framing the legislation as a jobs issue.

"We can talk, or we can act. International trade is a high stakes, cut-throat business, and every time we simply talk, the other side acts, and every time they act, an American loses a job," said Rep. Xavier Becerra, D-California.

China said this year it would allow its currency, the yuan, to trade in a wider range against the dollar. But the currency has scarcely appreciated since then, inflaming critics who charge that the undervalued yuan, also known as the renminbi, helps steal U.S. manufacturing jobs.

Estimates on the undervaluation of the yuan vary, depending on the economic model used, but one estimate by the Peterson Institute of International Economics puts the number at about 24 percent against the dollar.

Such undervaluing makes Chinese goods cheaper to buy in the United States and likewise drives up the price of U.S. goods sold in China.

The House vote caps years of frustration for lawmakers as the United States has continued to shed manufacturing jobs, and promises of reform from the Chinese have failed to result in policy changes.

"If this risks upsetting the People's Republic of China, so be it," said Ohio Democrat Tim Ryan. "Whether you're a Democrat or a Republican, a liberal or a conservative -- millions of good-paying jobs have been lost and hundreds of thousands of families across this country have suffered as a result of China's unlawful trade policies."

The legislation now moves to the Senate. Sen. Charles Schumer, a New York Democrat, says the body will act quickly to move the bill to the president's desk.

"We must take decisive action against China's currency manipulation and other economically injurious behavior," Schumer said Tuesday, noting that the Senate will take up the issue when it reconvenes later this year.

"China is merely pretending to take significant steps on its currency," Schumer said. "This sucker's game is never going to stop unless we finally call their bluff."

But not every member of Congress is convinced, especially after China raised tariffs on U.S. poultry producers earlier this week and accused them of dumping product into the Chinese market.

Citing potential retaliatory measures from China, Texas Republican Rep. Jeb Hensarling said the bill was "unwise public policy" during tough economic times.

But trade groups and unions cheered the bill's passage. AFL-CIO President Richard Trumka issued a statement of support and Scott Paul, the director of the Alliance for American Manufacturing echoed the message.

"This is one of the most pleasantly lopsided trade votes in recent history," Paul said in a statement. "Voters are mad and Congress is finally responding.

Earlier on Wednesday, President Obama addressed the issue at a town hall-style meeting.

"The reason I'm pushing China about their currency is because their currency is undervalued," he said, adding that "people generally think they are managing their currency in a way that makes our goods more expensive to sell there and their goods cheaper to sell here."

The resulting imbalance is a major factor contributing to the U.S. trade deficit, the president said.

Last week, Obama urged Chinese Premier Wen Jiabao to speed up the revaluation of the yuan currency, telling him in a two-hour meeting at the United Nations that the slow pace of reforms was affecting both global and U.S. economies.

The meeting on the sidelines of the U.N. General Assembly followed a speech by Wen the night before, in which he told the business community in New York that China will continue reforming and opening its markets under a policy it started in 1978 by officially ending decades of isolation.

However, demands by U.S. lawmakers that China revalue its currency by more than 20 percent would bankrupt Chinese companies and lead to "major unrest" in his country, Wen said in the speech.

CNN's Jo Kent contributed to this report.