US Treasury says China not manipulating currency

Reuters) - The U.S. Treasury Department ruled on Friday China was not manipulating its currency to gain an unfair trade advantage, but said Beijing still needs to quicken the pace of appreciation.

“Treasury’s view ... is that progress thus far is insufficient and that more rapid progress is needed,” the department said in its semiannual report.

The report had originally been due on April 15 but was delayed ahead of a key meeting with senior Chinese officials in Washington earlier this month.

The yuan closed at 6.4917 to the dollar on Friday, little changed on the day, but up 5.15 percent since it was depegged in June 2010.

Treasury’s decision came as no surprise.

President Barack Obama’s Democratic administration has declined to name China as a currency manipulator in five consecutive reports now, following the pattern set by the Republican administration of former President George W. Bush.

Many U.S. lawmakers and import-sensitive manufacturers, such as steel and textiles, claim that China’s currency is undervalued by as much as 40 percent, giving Chinese companies an unfair price advantage in international trade.

Congress has threatened for years to pass legislation to pressure China to revalue its currency, but so far no bill has reached the president’s desk.

Commerce Secretary Gary Locke, tapped to be the next U.S. envoy to China, told the Senate Foreign Relations Committee on Thursday that a more flexible Chinese currency was key to U.S.-China economic rebalancing.

“We are seeing movement on the currency,” he said, referring to a roughly 5 percent increase since China slightly loosened the yuan peg to the dollar in June 2010.

“We believe it should float more and faster,” Locke said.