April 17, 2006    Volume 13, No. 8

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China's Reserves Soar: NAM Says The Time Has Come For China To Re-Value Its Currency

BY RICHARD McCORMACK richard@manufacturingnews.com

It has become "imperative" for the Department of Treasury to declare that China is manipulating its currency, says Pat Mears, director of international commercial affairs at the National Association of Manufacturers. Further evidence of China's manipulation is that nation's growing currency reserves. They have risen to $848 billion, and are now the largest in the world, surpassing those of Japan's at $837 billion.

"China's currency reserves are nearing half of China's total gross domestic product," Mears notes. "Rather than tying up that much of its economy in low-interest official holdings -- primarily in U.S. dollars -- China could be using those funds to build internal economic strength. China continues to buy dollars to keep its currency suppressed below market values in order to fuel export-led growth, but it's high time for this to stop. It's distorting global trade flows and distorting China's economy."

China's reserves grew $220 billion in the past 12 months. "Not coincidentally, that was the size of its trade surplus with the United States last year," says Mears.

The Treasury Department is expected to issue its bi-annual assessment on currency manipulation at the end of April. In previous reports, it has used China's trade data instead of import and export figures from the United States government in its analysis of China's currency. It has refused to label China as being a country that manipulates its currency despite demands from an increasingly agitated and frustrated community of U.S. manufacturers and workers.

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