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17 Mar, 2010 03:26

US bill on foreign currencies may worsen US-China relations

Simmering economic tension between the US and China may be reaching a crescendo, as the US Senate has introduced a bill to try to control China’s “currency manipulation.”

The legislation aims to encourage China to revalue its currency, which the US believes has been kept artificially low vis-à-vis the dollar. If passed, the legislation would impose penalties on China, such as trade sanctions, if it fails to let the yuan rise.

Economist Philip De Leon believes the draft law has been driven by domestic pressure on President Barack Obama to tackle unemployment.

“I think President Obama wanted to be nice and go to the table to negotiate,” De Leon said. “He has tried. But with China it doesn’t always work this way. So, now he understands that he needs to knock on the table and say to the Chinese, ‘You really have to change certain things.’ And that is what he is doing right now.”

Meanwhile, American author Webster Tarpley says the US is just trying to sabotage the strength of China's growing economy.

“It is a terrible idea and, of course, at the surface level it is new demagogy by a bunch of bankrupt lawmakers who are trying say: ‘We’ve got to blame the US depression on the Chinese.’ On April 15, the US Treasury comes up with a report about currency situation in the world, and they are very likely to condemn China as a currency manipulator,” Tarpley says.