Charles Schumer, a New York Democrat, is co-author with Lindsey Graham, a South Carolina Republican, of a bill that would impose a tariff of 27.5% on Chinese imports into the United States unless Beijing revalues the yuan at or near its fair market value.
We are not here to dictate specific markers...We want to see if there has been a pattern of progress, Schumer told reporters at the start of a fact-finding trip.Schumer and Graham are holding talks to decide whether to go ahead with a vote on their bill by March 31.
Asked what China should do regards its currency, Schumer said: Our goal is for China to move on their own... There are no magic words.
Its a delicate game. The Chinese are very sensitive to being pressured into things. We are waiting and seeing. Its premature to give any impressions.The two law-makers, accompanied by Oklahoma Republican Tom Coburn, met Chinese Foreign Minister Li Zhaoxing on Tuesday, who briefed them on Chinas exchange rate policies.
He said frictions should be resolved on the basis of cooperation through negotiation, Foreign Ministry spokesman Qin Gang said, referring to Li. We should not politicise these issues and magnify them, Qin told a news conference.
The senators were expected to meet central bank governor Zhou Xiaochuan and Commerce Minister Bo Xilai later in the week.
The yuan slipped a touch on Tuesday to 8.0274 per dollar after hitting 8.0232 per dollar on Monday. That was the highest level since Beijing revalued the yuan by 2.1% on July 21 and freed it from a dollar peg to float within managed bands.
The yuan has now gained 1.03% since the revaluation.
The senators contend the yuan is deliberately undervalued by 15% to 40%, handing Chinese exporters an unfair advantage that is bloating the $202 billion US trade deficit and destroying millions of American manufacturing jobs.
Premier Wen Jiabao last week ruled out another one-off revaluation but said China would gradually permit greater movement in the exchange rate.
Sure enough, the yuan has risen at a 3.5% annual pace over the past four weeks, a movement driven not just by US political factors but also by Chinas economic fundamentals, said Jonathan Anderson, chief Asian economist with UBS in Hong Kong.
We believe dollar/yuan could trade below the key psychological level of 8.00 within the next few weeks, he said in a note to clients.
The Schumer-Graham bill is not new but, with President Hu Jintao due to visit the United States next month, the measure has become a lightning rod for US unease over the speed of Chinas economic rise. My goal is to sell the idea that stability is best achieved when everyone plays by the same rules, Graham said.
The bill is opposed by President George W. Bush and by many in the US business community. For one thing, they say, the measure would flout World Trade Organisation rules.
But Stephen Roach, Morgan Stanleys chief economist, urged Bejing not to treat the Schumer/Graham initiative as run-of-the-mill political pressure.
He said it was a question of when, not if, the bill was put to a vote in the Senate, which was likely to approve it by a significant margin.