The US-China Economic and Security Review Commission also said in its annual report to Congress that small and medium US manufacturers, which represent more than half the manufacturing jobs in America, “face the full brunt of China’s unfair trade practices, including currency manipulation and illegal subsidies for Chinese exports.”
China’s economic policies create a trade relationship that is “severely out of balance” in China’s favor, said the commission, which Congress set up in 2000 to investigate and report on US-China issues. Carolyn Bartholomew, the commission’s chairwoman, told reporters that “China’s interest in moving toward a free market economy is not just stalling but is actually now reversing course.” Messages left with the Chinese Embassy in Washington were not immediately returned. Chinese officials have reacted to past reports by warning against what they see as outside interference in Chinese affairs.
The report comes about a year before US presidential and congressional elections, and candidates have been critical of what they see as China’s failure to live up to its responsibilities as an emerging superpower. China often is singled out for its flood of goods into the United States; for building a massive, secretive military; for abusing its citizens’ rights; and for befriending rogue nations to secure sources of energy.
US officials also recognize that the US needs China, a veto-holding member of the UN Security Council, to secure punishment for Iran’s nuclear program and to persuade North Korea to give up its nuclear weapons. The commission’s Democratic and Republican appointees have begun meeting with congressional staff and lawmakers to discuss the report’s 42 recommendations.
In the report, the commission said China’s spies allow Chinese companies to get new technology “without the necessity of investing time or money to perform research.” Chinese espionage was said to be straining US counterintelligence officials and helping China’s military modernization.
While the report praised China for some economic progress this year, improvements were undertaken “with great hesitancy and, even then, only with the prodding of other nations and the World Trade Organization.” China, it said, “maintains a preference for authoritarian controls over its economy” and has done too little to police widespread copyright piracy of foreign goods sold in China.
People’s Bank of China official says US dollar remains country’s primary reserve currency
People’s Bank of China Assistant Governor Yi Gang said Wednesday that China’s policy toward its currency holdings that are mostly weighted in US dollars is “very firm,” and any future changes should be driven by economic fundamentals. Yi’s remarks followed comments last week by the vice chairman of an advisory body within China’s parliament suggesting that China may want to dump some of its dollar holdings in favor of euros, which sent the US currency tumbling.
At a conference sponsored by the Cato Institute, Yi noted Wednesday that the US dollar is the largest currency holding in China’s reserves because most trade, foreign direct investment, and clearance and settlements are conducted in dollars. “The US dollar is the main currency in our reserves, and that policy is very firm,” he said.
Yi alluded to recent speculation that China could shift its currency reserves away from dollars. “I think that probably is opinion,» he added, and «if they want to express their opinion that is fine, we consider it and we listen to it. But that does not change our policy.” Yi said Wednesday that any diversification of China’s currency reserves should be based on real economic transactions, such as trade and foreign direct investment.
Yi also said that movement toward a more flexible exchange-rate regime in China is important, but that it needs to be done along with other economic reforms including greater domestic consumption and more openness in the service sector. “An undervalued renminbi is not in the interest of China,” Yi said of the country’s official currency. “We make that very clear.” Washington AP