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1 (November 29, 2005)

handle is hein.crs/crsuntaabxc0001 and id is 1 raw text is: Order Code RS22338 November 29, 2005 CRS Report for Congress Received through the CRS Web China's Currency: Brief Overview of U.S. Options Jonathan E. Sanford Specialist in International Political Economy Foreign Affairs, Defense and Trade Division Summary Many are concerned that China's currency is undervalued and that this injures the U.S. economy. The Chinese authorities say they are not manipulating their currency and they want to move as soon as possible to a market-based yuan. A new exchange rate procedure was announced in July 2005 but has not resulted in meaningful changes in the yuan's international value. This report reviews the issues and discusses alternative approaches the United States might take to encourage more rapid reform. The Exchange Rate Issue The Controversy. In recent years, the United States and other countries have expressed, with considerable concern, the view that China's national currency (the yuan or renminbi) is seriously undervalued.! Many charge that China is manipulating the value of its currency in order to gain unfair trade advantage. They believe this has seriously injured the manufacturing sector in the United States and contributed significantly to the U.S. trade deficit. Chinese officials say that they have not fixed the exchange rate of the yuan against the dollar in order to gain trade advantages. Rather, they say the fixed rate promotes economic stability. Without this, they say, fluctuations in the yuan's value could cause serious dislocations in China's domestic economy. The issue of manipulation is a serious one. The International Monetary Fund (IMF) says, in Article IV of its Articles of Agreement, that countries shall Avoid manipulating exchange rates or the international monetary system in order to prevent effective balance 1 For a comprehensive discussion of the China exchange rate issue, see CRS Report RS21625, China's Currency Peg: A Summary of the Economic Issues, by Wayne M. Morrison and Marc Labonte, and CRS Report RL32165, China's Exchange Rate Peg: Economic Issues and Options for U.S. Trade Policy, by Wayne Morrison and Marc Labonte. See also CRS Issue Brief 1B91121, China-U.S. Trade Issues, by Wayne M. Morrison. The term renminbi means people's currency while yuan is the unit of account (one yuan, two yuan, etc.) Congressional Research Service 4- The Library of Congress

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