U.S. again declines to brand China currency manipulator

By Glenn Somerville and Doug Palmer

WASHINGTON (Reuters) - The Treasury Department on Wednesday declined to label China a currency manipulator, retreating from tough talk last year when a campaigning Barack Obama said Beijing had kept its currency's exchange rate unfairly low.

In a semiannual report to Congress on currency practices of key trading partners, the Treasury said all were suffering from the current global economic downturn, but said none manipulate their currencies for trade advantage.

While the Treasury said it "remains of the view that the yuan is undervalued," as shown by China's huge trade surpluses and foreign exchange reserves, it did not estimate the level at which the yuan, also called the renminbi, should be trading.

Both Obama, while campaigning for president, and Timothy Geithner, now the Treasury secretary, had explicitly said in a written statement to the Senate Finance Committee that China manipulates its currency's value. The report's findings that it does not may provoke lawmakers' anger.

"We continue to believe that China manipulates its currency," said Sen. Charles Schumer, a New York Democrat who has been a vocal critic of Beijing.

"We understand that global economic conditions make it difficult for the Obama administration to make this determination at the present time. But we are relying on the administration, as market conditions clear up, to keep China's feet to the fire on this issue," Schumer said.

Senators will reintroduce legislation giving the White House new tools to press China on the currency front, he said.

In a nod to business groups and politicians who remain critical of Beijing's currency practices, the Treasury said it will keep pressing Chinese authorities at every turn to allow more exchange rate flexibility and to take steps to spur domestic demand.