The Chinese government is fiercely resisting U.S. and international pressure to allow its currency to appreciate to a market-based level, launching an offensive on multiple fronts to try and discredit the allegations, garner international sympathy and lobby behind the scenes to prevent any action from being taken.

Just days after U.S. lawmakers introduced legislation to penalize Beijing for manipulating its currency, sent a bipartisan letter signed by 130 House members demanding greater action and announced that Congressional hearings on the matter would take place, Chinese officials have come out swinging.

On Thursday, Qin Gang, a foreign ministry spokesman, accused the U.S. of engaging in protectionism.

There is no question that China has been manipulating its currency since July 2008.  Since that time, the currency has been pegged at about 6.38 yuan per dollar.

Some studies have found China’s currency to be undervalued by as much as 40 percent, giving the nation a huge advantage in international trade.  With its currency artificially low, its exports are cheaper as well, allowing it to sell more.  At the same time, the price of imports are inflated, giving Chinese producers a cost-advantage.

Currency manipulation has allowed China to gain massive trade surpluses with the U.S., which in turn results in jobs loss at home as producers find that they simply cannot compete or find that outsourcing to China is the best option.   

“China’s currency manipulation essentially subsidizes Chinese exports and imposes tariffs on foreign imports. This presents an insurmountable trade barrier to U.S. manufacturers,” said Michael Michaud, Chairman of the House Trade Working Group and a longtime fair trade proponent.

But Chinese officials are not willing to admit the errors of their ways.  Instead, they are simply acting as though nothing is wrong – at least publicly.  Behind the scenes, Chinese officials are reportedly pressuring American multinational companies operating in China to use their influence in the states to prevent action from being taken against Beijing for its undervalued currency. 

“We hope that US companies in China will express their demands and points of view in the U.S., in order to promote the development of global trade and jointly oppose trade protectionism,” said Yao Jian, a spokesman at the Chinese commerce ministry, according to The Financial Times. 

The Globe and Mail also reports that Chinese officials plan to appeal directly to American consumers, arguing that any effort to force China’s hand to allow its currency to appreciate could result in higher prices on a whole range of products.  That argument, however, is likely to fall on deaf ears in a nation with an unemployment rate hovering near the 10 percent mark.
   
“They’re living on a different planet,” University of Maryland economist Peter Morici told The Globe and Mail.  “They are simply not moving on the issue.”

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