The US Government Hopes The Chinese Government Will Allow The Renminbi To Appreciate.

On the night of September 24th Beijing, the US House raising Committee approved a bill on China's exchange rate issue on Friday. According to the bill, if the value of a country's currency is considered to be artificially underestimated, the US government has the right to impose a punitive tariff on goods from that country.

Some members believe that US exports will be greatly boosted once the renminbi appreciates.

The following are the main provisions of the bill passed by the fundraising committee:

How much money is undervalued?

The bill requires the US Department of Commerce to calculate the extent of underestimation of money under the rules set by the International Monetary Fund (IMF)'s exchange rate advisory group.

If these rules are not applicable in some cases, the US Department of commerce should use commonly accepted economics and econometric techniques and methods to calculate the degree of underestimation of money.

In addition, the US Department of commerce should rely on the publicly available data collected and published by IMF to calculate the extent of the undervaluation of the currency. If IMF does not release relevant data, the Ministry of commerce should calculate the data based on the data provided by other international organizations or governments.

The bill also points out that when calculating the degree of underestimation of money, the US Department of commerce should also examine the correction of inflation and the weighted exchange rate of trade volume.

Fundamentally underestimating the definition of money

If a country meets the following criteria, its currency will be regarded as a fundamentally undervalued currency by the United States.

1. within a period of 18 months, a country's government intervened at least one foreign exchange market for a long and large scale.

2. within a period of 18 months, a country's "real effective exchange rate" is at least underestimated by 5%.

3. within a period of 18 months, a country's global current account surplus is huge and this condition lasts for a long time.

4. within a period of 18 months, a foreign exchange reserve held by a national government exceeds the amount required for debt repayment in the next 12 months or exceeds 20% of the country's currency supply or exceeds the value of the country's previous four months of imports.

The bill also requires that the chief auditor general of the United States issue a special report on the implementation of the bill within nine months.

The old version of the fair trade exchange reform bill in the United States totaled 17 pages, while the new bill only had 6 pages.

Assistant officials of the fundraising committee pointed out that the bill had been amended to ensure that the finalization was in line with the WTO rules.

They also said that the requirements of the new legislation were more stringent than the laws of the United States and the WTO.

They said that even if the bill was passed, it would not guarantee that the US Department of Commerce would impose anti-dumping duties on the commodities which were undervalued by the currency, but the passage of the bill would remove an important obstacle for the Ministry of Commerce to take such actions in the future.