The Treasury Department is receiving bipartisan criticism for the late release of its exchange rate report and for continually declining to label China as a currency manipulator.
The report, which was issued Thursday evening, states that the Chinese yuan, or renminbi, remains undervalued, but gives the Chinese government credit for its announcement in late June that it would return the yuan to an exchange rate-based regime and end its peg to the dollar.
The report did, however, call on China to let the yuan appreciate faster, instead of within plus or minus .5 percent against the dollar. The yuan has appreciated .81 percent against the dollar from June 21 through July 2.
"We will closely and regularly monitor the appreciation of the renminbi and will continue to work towards expanded U.S. export opportunities in China that support employment in the United States, in close consultation with Congress," Treasury Secretary Geithner said in a statement.
The administration has faced a tough balancing act between putting pressure on China while not publically labeling China a currency manipulator, all the while facing pressure from members of Congress who have complained that Chinese currency manipulation hurts American manufacturing.
Geithner has taken heat from members of the Senate Finance Committee for the tardiness of the semi-annual report, which was due to Congress on April 15, and senators, including Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., have pushed legislation they hope will force China to move to a more market-based exchange rate.
In a statement, Schumer called the report "as disappointing as it is unsurprising," and added it was "clear" that it would take congressional action "to do the obvious and call China out for its currency manipulation."
Senate Finance Chairman Max Baucus declined to use the phrase currency manipulation in his statement, and gave China credit for moving forward on allowing its currency to appreciate, "but small steps are not enough," he said. "China must take significant steps to appreciate its currency and I expect those steps to happen soon."
Finance ranking member Charles Grassley of Iowa was harsher in his statement, saying Treasury's assessment "doesn't match the facts." Grassley called on the administration to bring a case against China to the World Trade Organization, which House Ways and Means Chairman Sander Levin has also said the administration should consider doing.
"If the president continues to avoid acknowledging China's currency manipulation and fails to address it in a meaningful way, Congress will have to act," Grassley said.
Sen. Sherrod Brown, D-Ohio, called on the Commerce Department to use currency manipulation in its investigation of Chinese paper and aluminum subsidies.
Exchange rate legislation was looming as an amendment to a bill from Baucus and Senate Small Business Chairwoman Mary Landrieu to increase lending and provide tax incentives to small businesses, although it is unclear if it will be considered.
This article appears in the July 10, 2010, edition of National Journal Daily PM Update.