Despite increasing pressure in America on China to allow its currency to appreciate to a fair market value, communist party leaders say they have no intention of acquiescing to outside pressure, according to multiple media reports.

Not even a visit from National Economic Council Chairman Larry Summers this week has swayed top Chinese officials. Not only is Beijing not willing to give an inch, officials seem to indicate that outside pressure could actually slow the process that China vowed to begin in June.

“We firmly oppose politicizing trade and economic issues and our yuan exchange rate reform cannot be pressed ahead under external pressure,” Chinese Foreign Ministry spokeswoman Jiang Yu said at a press conference today, according to The Associated Press.
A recent study by the U.S.-China Economic and Security Review Commission found that China’s currency may be undervalued by as much as 40 percent.

The practice has allowed China to gain a competitive advantage on the U.S. in international trade. The last time the U.S. and China had a balanced trade relationship was in 1985. Since 2005, Americans have spent $1.1 trillion on Chinese products; Chinese consumers have bought just $272 billion worth of goods over that same time.

That massive trade imbalance has resulted in steep job losses, especially in those industries in which China is actively trying to gain an advantage on the U.S. According to the Economic Policy Institute, from 2001 to 2007, the U.S. lost 2.3 million manufacturing jobs to China due to massive trade deficits.

On June 19th, after years and years of pressure from American and European officials, Beijing said that it would allow its currency to rise to a fair market value. However, since that time, the yuan has risen just 0.6 percent.

China’s failure to follow through on its pledge, combined with its flippant attitude about doing so, has led some to press for domestic legislation punishing China for its undervalued currency.

“Preliminary estimates point to as much as a $500 billion reduction in our nation’s federal budget deficit over the next six years from ending China’s currency manipulation,” said USW President Leo Gerard. “Next month, when Congress returns, you will have the opportunity to cut our trade deficit in order to address lagging growth, and, at the same time, make a substantial down payment on the federal deficit while spurring job growth.”

The legislation Gerard is referring to is a bill introduced by Sen. Chuck Schumer (D-NY) that would force the Treasury Department’s hand in its report on currencies, which in the past has failed to label China as a currency manipulator. Currently, the Treasury Department must be able to demonstrate willful intent on the part of the alleged currency manipulator. Under the bill, those rules would be waived.

If a nation was deemed to be manipulating its currency under Schumer’s bill, immediate action, including imposing steep tariffs, could be taken. The longer a nation’s currency remains misaligned, the steeper the penalties would be.

The Commerce Department would also gain additional authority to act under the bill. If a nation simply refuses to adjust its currency, the bill would provide the Commerce Department with the ability to use anti-dumping laws to counteract the effects that currency manipulation has on pricing. In addition, the Commerce Department would have the authority to levy countervailing duties against the offending nation.

“We are sending a message to the Chinese government: if you refuse to play by the same rules as everyone else, we will force you to,” Schumer said in a statement.

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