Senior U.S. lawmakers condemn 'provocative' China currency devaluation

Senior U.S. lawmakers condemn 'provocative' China currency devaluation


WASHINGTON (Reuters) - Senior U.S. lawmakers from both political parties on Tuesday condemned China's surprise currency devaluation as a grab for an unfair export advantage and urged inclusion of currency manipulation curbs in a new Pacific Rim trade deal.

Several members of Congress said the devaluation of the yuan by China's central bank on Tuesday raised serious concerns. Some suggested it was further proof China cannot be trusted on currency policy.

China's 2.0 percent yuan devaluation came weeks ahead of the first state visit to the United States by Chinese President Xi Jinping amid other tensions over trade, cybersecurity and international development.

"It's time for the administration to focus more intensively on China's cheating and label the country a currency manipulator," Democratic Senator Bob Casey, a member of the Senate Finance Committee, said in a statement.

China's central bank said the devaluation resulted from reforms meant to make its exchange rate more market-oriented.

A cheaper yuan will help Chinese exports by making them less expensive for importing countries. Some lawmakers said the move displayed China's intent to manipulate its currency to gain a trade advantage.

"China has manipulated its currency for a long time. This is just the latest example, and it’s past the time to do something about it," said Republican Senator Chuck Grassley.

Grassley and Representative Sander Levin, the top Democrat on the House of Representatives tax committee, suggested tough anti-manipulation measures should be part of the Trans-Pacific Partnership trade deal under negotiation.

Grassley and Levin said Congress should explore including a provision in a customs bill being negotiated in Congress to allow for penalties on currency manipulators.

Levin said there was "reason to be skeptical" that the Chinese action was designed merely to move to a market-based exchange rate and said it raised "serious concerns."

Chuck Schumer of New York, the No. 3 Senate Democrat, said the Chinese currency should be barred from consideration as a global reserve currency until China stops devaluing it.

At least two of the Republican contenders in the 2016 presidential race also weighed in.

"Today's provocative act by the Chinese government to lower the value of the yuan is just the latest in a long history of cheating," said Senator Lindsey Graham of South Carolina.

Real estate mogul Donald Trump, who has frequently promised to be tough with Beijing, told CNN: "They keep devaluing their currency until they get it right. They're doing a big cut in the yuan, and that's going to be devastating for us."

However, many economists noted the Chinese currency has been linked to the U.S. dollar for several years, and so has risen against other major currencies as the U.S. dollar has risen 20 percent in the past year, making Chinese exports less competitively priced than they were, contributing in turn to the recent slowdown in Chinese economic growth.

"I don't see this affecting the Fed decision (to raise interest rates) unless it develops into something that roils markets substantially," said Peter Hooper, chief economist at Deutsche Bank Securities and a former Fed economist.

"It adds a little more drag to the economy via net exports and puts a slight damper on consumer prices, but not enough to alter the course of the U.S. economy or labor market significantly," he said.

(Editing by Kevin Drawbaugh and Clive McKeef)