Schumer on China Currency

Schumer on China Currency

Sen. Chuck Schumer's opening statement from the Banking Committee Hearing and the chart he referred to attached as a pdf. In Schumer's first round of questioning, Secretary Snow suggested that the Schumer-Graham bill would likely pass in the Senate if China doesn't move its currency further and also said that the Treasury Department report on currency next due in the fall would be more likely to find China a manipulator if there was not more movement in the Yuan during that period.

Senator Charles E. Schumer
Statement for Secretary John Snow - Banking Committee Hearing on Treasury's Currency Report
May 18, 2006

Mr. Secretary, welcome back to the Banking Committee. As I have said before, Senator Graham and I appreciate how you have become more of an ally on the issue of China currency over the last year, and it's good to see you again.

I only have a few minutes this morning for my statement, so I want to get right to the point. Despite my renewed confidence that you share my view that China should and could reform its currency practices at a faster pace, I am very disappointed in Treasury's recent report to Congress on international exchange rate policies - as disappointed as I am in China's progress to date.

In fact, while I came back from China believing that it was moving forward on the currency issue, I've scaled back my optimism a notch or two. I now believe that China is only facing forward, but not yet moving forward. They have simply made too little measurable progress since last July for any reasonable person to argue that China has really moved. The lack of any real appreciation of the yuan in recent months supports that view.

In the report you issued last week, the executive summary says that the Treasury Department is, and I quote, "unable to determine, from the evidence at hand, that China's foreign exchange system was operated during the last half of 2005 with the purpose (i.e., with the intent) of preventing adjustments in China's balance of payments or gaining China an unfair competitive advantage in international trade."

With all due respect, Mr. Secretary, this is a very technical and legalistic dodge that prevents the Administration from stating publicly what's obvious to all of us: China is a manipulator and the Administration is simply afraid to say so. After all, if it walks like a duck and quacks like a duck, it's a duck. Calling it a swan doesn't change that simple fact.

Let's look at what has happened to the yuan in the last four weeks, since President Hu visited the United States. From April 17 to 21, the yuan did not appreciate at all, even though that week coincided with President Hu's visit here. From April 24 to 28, the same story. From May 1 to 5, again the same story. Finally, last week, the yuan appreciated by one-tenth of one percent. It's essentially just as flat as it was before China eliminated the dollar peg. And during these same four weeks, the other major Asian currencies were all appreciating against the dollar.

This chart goes back to April 1 of this year, and I think it tells a pretty convincing story.

The dollar has depreciated significantly since the beginning of April against most major currencies. And yet, despite the dollar's decline against all of these other currencies, the yuan has appreciated only 0.2 percent since April 1.

One of the things I want to discuss with you, Mr. Secretary, when it's my turn for questions, is this: You argue that you can't find the Chinese guilty of manipulation since we can't tell their intent. But looking at this data and this chart, how can you possibly argue that it's an accident? It defies credibility to believe that it is.

That's essentially what you're arguing, and it's simply absurd, considering the evidence. I look forward to discussing this with you during the question-and-answer period.

Thank you, Mr. Chairman.

http://schumer.senate.gov/SchumerWebsite/pressroom/press_releases/2006/PR162.China.051806.html