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</o:shapelayout></xml><![endif]--></head><body lang=EN-US link=blue vlink=purple><div class=WordSection1><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Trebuchet MS","sans-serif"'>U.S. Declines to Label China a Currency Manipulator <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:navy'>By <a href="http://online.wsj.com/search/term.html?KEYWORDS=TOM+BARKLEY+++++&bylinesearch=true">TOM BARKLEY </a><o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:navy'>JULY 8, 2010, 6:46 P.M. ET<o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:navy'><a href="http://online.wsj.com/article/SB10001424052748704111704575355533569310948.html">http://online.wsj.com/article/SB10001424052748704111704575355533569310948.html</a><o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:navy'><o:p> </o:p></span></p><p class=MsoNormal style='line-height:200%;background:white'><span lang=EN style='font-size:10.0pt;line-height:200%;font-family:"Trebuchet MS","sans-serif";color:black'>WASHINGTON -- The U.S. opted against declaring China a currency manipulator Thursday, with U.S. Treasury Secretary <a href="http://topics.wsj.com/person/g/timothy-geithner/624"><span style='color:#093D72;text-decoration:none'>Timothy Geithner</span></a> instead shifting the focus forward on the yuan's future appreciation. </span><span lang=EN style='font-size:10.0pt;line-height:200%;font-family:"Trebuchet MS","sans-serif";color:#666666'><o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>"What matters is how far and how fast the renminbi appreciates," said Mr. Geithner in a statement, referring to the other name for China's currency. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>He pledged to "closely and regularly monitor" the currency's appreciation and consult with Congress in ongoing efforts to expand U.S. exports to China. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>The Treasury's decision once again to decline to declare formally that China is manipulating its currency is <b>certain to further anger members of Congress,</b> who happen to be on recess this week. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>Mr. Geithner's decision to skip an April deadline to submit the semi-annual currency report to Congress raised hackles on both sides of the aisle. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>He has called for patience in pursuing quiet diplomacy to get China to resume the currency appreciation that it halted in 2008 during the global crisis, pointing to the decision last month to depeg the yuan from the dollar as evidence of success. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>The Treasury said in its report that the depegging is a "significant step," while noting that the currency remains undervalued. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><b><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>Still, many lawmakers remain unconvinced by China's overture. Rep. Sander Levin (D, Mich.), who chairs the powerful House Ways and Means Committee, responded to the announcement by calling for the U.S. to consider filing a complaint with the World Trade Organization if China fails to enact significant changes in currency policy. He dismissed the yuan's gains so far as too modest. <o:p></o:p></span></b></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>"There is no real question that China's exchange rate policy is unfair, contributes to global trade imbalances, and costs the United States jobs and economic growth, particularly in the manufacturing sector," said Mr. Levin in a statement. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>Since China's announcement on June 19, the yuan has strengthened 0.8% against the dollar, compared with the 21.2% appreciation during the last period of depegging from July 2005 through July 2008. But the Treasury stressed that it will take time before it can assess whether the policy change will correct the undervaluation. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>A bipartisan group of senators has introduced a bill that would lower the hurdle for taking action against China, requiring only that an exchange rate is misaligned instead of having to determine that a country is intentionally manipulating the currency. It also lays out a series of escalating punitive actions, including countervailing duties and prohibiting access to U.S. government contracts. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>If the Treasury finds a country is manipulating its currency under current law, it must launch bilateral talks or take the issue to the International Monetary Fund. <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;background:white'><span lang=EN style='font-size:10.0pt;font-family:"Trebuchet MS","sans-serif";color:black'>Write to Tom Barkley at <a href="mailto:tom.barkley@dowjones.com"><span style='color:#093D72;text-decoration:none'>tom.barkley@dowjones.com</span></a> <o:p></o:p></span></p><p class=MsoNormal><o:p> </o:p></p></div></body></html>