US Caves To Chinese, Delays "Currency Manipulator" Decision

Updated 4/4: The White House today said it would delay the decision about whether to label China a “currency manipulator.” Several members of Congress said they would continue to push for sanctions against the Chinese.

The US will almost certainly delay its decision about whether to label China as a “currency manipulator”, a move that will make it clear to the Chinese that they still have tremendous leverage in talks on the valuation of the yuan.

The Wall Street Journal reported that the delay is likely. The paper points out that the Administration, specifically the Treasury, was to send Congress its semi-annual report on the currency policies of America’s trading partners on April 15.China’s President Hu Jintao will come to the US on April 12th and 13th. The stated reason for his visit is to attend a nuclear summit called by President Obama. It was not clear whether Hu Jintao would come until recently.

But, the primary reason for Hu Jintao’s visit is almost certainly to see if he can settle the yuan issue with Washington. It is still possible that he will take a hard line. China has denied being a currency manipulator, but what else would the People’s Republic say?

China will view the willingness of the US to delay its decision as a signal that the Administration wants to avoid what would be a huge trade war at all costs. Obama is under pressure from many members of Congress who view China’s policy on currency as a cause of the multi-year erosion of US export strength, high joblessness in the manufacturing sector, and moribund GDP growth.

By moving the decision beyond the 15th, Obama shows that he will accommodate the Chinese even if it makes his Administration look weak.

Douglas A. McIntyre