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U.S. Criticizes China for Lack of Exchange-Rate ‘Flexibility’

By Rebecca Christie

Oct. 16 (Bloomberg) — The U.S. Treasury Department criticized China for the “lack of flexibility” of the yuan and a buildup of foreign-exchange reserves while stopping short of branding the nation a manipulator of its currency.

“The recent lack of flexibility of the renminbi exchange rate and China’s renewed accumulation of foreign-exchange reserves risk unwinding some of the progress made in reducing imbalances,” the Treasury said in its semiannual report to Congress on the currency policies, using another name for the yuan.

The report released yesterday, which found that no major U.S. trading partner illegally manipulated its currency in the first half of 2009, comes after Group of 20 leaders adopted a “framework” for sustaining global growth and reducing lopsided flows of trade and investment. The framework could see China boosting domestic demand, the U.S. saving more and Europe increasing investment.

“Both the rigidity of the renminbi and the reacceleration of reserve accumulation are serious concerns which should be corrected to help ensure a stronger, more balanced global economy consistent with the G-20 framework,” the report said. “The Treasury remains of the view that the renminbi is undervalued.”

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