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China not manipulating currency -- US Treasury

Major trading partners of the United States, including China, did not manipulate their currencies to gain an unfair advantage in international trade in 2010, according to ChinaDaily,com, citing a release by the US Treasury Department.

The Treasury said China’s behaviour did not fall under the US’ official definition of manipulation based on the resumption of exchange rate flexibility last June, and the acceleration of the pace of real bilateral appreciation over the past few months.

With respect to exchange rate policies, ten economies were reviewed in this report, accounting for nearly three-fourths of US trade. Many of the economies have fully flexible exchange rates. A few have more tightly managed exchanges rates, with varying degrees of management.

"No major trading partners of the United States" met the standards identified by the Congress as currency manipulator, the US Treasury concluded.

Since the June 19, 2010 announcement by China's central bank of greater exchange rate flexibility, its currency, also known as renminbi has appreciated 3.7% against the dollar, or about 6% annualised. The renminbi has appreciated 26% in total against the dollar since 2005.

The Treasury said that because inflation in China is significantly higher than it is in the US, the renminbi has been appreciating more rapidly against the dollar on a real, inflation-adjusted basis, at a rate which if sustained would amount to more than 10% year.

The US accuses Beijing of keeping its currency undervalued, flooding the country with cheap exports and costing US jobs. But many economists believe that the appreciation of renminbi will help little to the US employment. – Source: