They really are out of control, aren't they?
May 17, 2005
U.S. Warns China on Currency Policies and Hints at Retaliation
By EDMUND L. ANDREWS
WASHINGTON, May 17 - The Bush administration warned China today that its currency policies were "highly distortionary" to world trade and implicitly threatened to retaliate if Chinese leaders did not change course within the next year. In language far harsher than any it has used before, the Treasury Department declared that China's fixed exchange rate between its yuan and the dollar posed a risk to itself as well as to global growth.
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China has pegged its currency, the yuan, at a fixed exchange rate to the dollar ever since 1994. But its trade surplus with the United States ballooned to $162 billion last year as Chinese exports of clothing, toys, machinery and electronics have soared. Left to normal market forces, currency analysts say, the value of the yuan would have climbed against the dollar. But China and other Asian governments have kept the value constant by buying hundreds of billions of dollars in United States Treasury securities.
The Chinese central bank bought more than $250 billion in dollar-denominated securities over the past year and now holds more than $600 billion, according to recent estimates.
But even before the Bush administration issued its warning today, Chinese leaders had already warned on Monday that currency policy was a "sovereign" issue and that they would not be pushed into decisions by other governments.
http://nytimes.com/2005/05/17/business/17cnd-china.html?ei=5094&en=05b72fde59e638ad&hp=&ex=1116388800&partner=homepage&pagewanted=print
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