Obama administration declines to label China a currency manipulator

November 28, 2012

U.S. manufacturers that feel China has an unfair advantage when it comes to global trade will be disappointed with the decision by the Obama administration not to label the country as a currency manipulator.

According to The Associated Press, manufacturing companies had hoped that the release of a Treasury report regarding the possibility of countries manipulating their currency to gain value in overseas markets would be the moment when China received a global slap on the risk. The issue of manufacturing in China was a hot topic during the recent presidential campaign, and Mitt Romney, who lost the election to President Obama, had made it part of his platform to brand the Chinese as trade manipulators if he was elected to office.

However, despite the pressure being put on the government by manufacturing companies to provide a gesture of public support, the Treasury report notes that the Chinese currency is "significantly undervalued," advising that it has allowed the yuan rise in value against the dollar since 2010. The last time that the U.S. levelled the charge of currency manipulation against a nation was in 1994, when the Clinton administration accused China of the practice.

Some industry analysts consider that while a weaker yuan makes Chinese goods cheaper for consumers, the issue of quality management in manufacturing is not addressed through currency levels and that the Treasury report is a sign that the U.S. manufacturing sector provides better value in the global market. The industry is believed to be going through a revival at the moment and federal officials feel that getting into another trade war with China would spark a retaliatory action against U.S. companies that could prove to be damaging in the long run.

China is one of the leading importers of American goods and there have been signs that consumers in the country are prepared to pay well for products manufactured in the U.S. Companies have been able to take advantage of the demand for items that are "made in the USA," with manufacturers able to move away from concerns over implementing a lean enterprise, and bolster their output.

"The Treasury will continue to closely monitor exchange rate developments in all the countries covered in this report, with particular attention to the pace of RMB appreciation, and press for policy changes that yield greater exchange rate flexibility, improve transparency, level the playing field for American workers and businesses, and support a strong, sustainable, and balanced global economy," concluded the report.