*EPF308 09/10/2003
Text: Proposed Resolution Calls for Market-Based Valuation of Yuan
(S. Res. 219 urges China to honor its international obligations) (720)

A bipartisan group of senators has introduced a resolution calling on
China to allow its currency to have its value determined by market forces and not by government fiat.

Senator Lindsey Graham (Republican of South Carolina) introduced Senate
Resolution 219 to the Senate September 9, and the proposed resolution was then referred to the Senate Foreign Relations Committee for action.

S. Res. 219 also calls on Beijing to continue to "act on its commitments to the trade rules and principles of the international community of which it is now a member."

Among the resolution's eight co-sponsors is Senator Joseph Lieberman (Democrat of Connecticut). He was the Democratic nominee for Vice President in the 2000 elections, and is now a candidate for the Democratic nomination for President in the upcoming 2004 elections.

Graham is also one of the sponsors of S. 1586, a bill introduced September 5, which would impose a 27.5% duty on Chinese imports to the United States if China does not end its policy of keeping the Chinese yuan at an artificially low rate in comparison to the U.S. dollar.

Republicans in the House of Representatives are also taking up the issue of China's allegedly undervalued yuan.

Representatives Phil English (Republican of Pennsylvania), Cass
Ballenger (Republican of North Carolina) and Mark Green (Republican of Wisconsin) held a September 10 news conference on Capitol Hill to announce a House version of S. 1586. The House resolution urges China to allow the yuan's value to "float," i.e. to follow a flexible exchange rate system in which the exchange rate is determined by the market forces of supply and demand without intervention.

Following is the text of Senate Resolution 219 from the Congressional
Record:

(begin text)

Senate

September 09, 2003

SENATE RESOLUTION 219

TO ENCOURAGE THE PEOPLE'S REPUBLIC OF CHINA TO ESTABLISH A MARKET-BASED
VALUATION OF THE YUAN AND TO FULFILL ITS COMMITMENTS UNDER
INTERNATIONAL TRADE AGREEMENTS

Mr. GRAHAM of South Carolina (for himself, Mr. SCHUMER, Mr. VOINOVICH,
Mr. CHAMBLISS, Mr. LIEBERMAN, Mr. ALLEN, Mr. SPECTER, Mr. ENZI, and Mr.
KYL) submitted the following resolution; which was referred to the
Committee on Foreign Relations:

S. Res. 219

Whereas the currency of the People's Republic of China, the yuan or
renminbi, has been tightly pegged to the United States dollar at the same
fixed level since 1994;

Whereas the undervaluation of China's currency makes exports from China
less expensive for foreigners and makes foreign products more expensive
for Chinese consumers, an effective subsidization of China's exports
and a virtual tariff on foreign imports;

Whereas the Government of the People's Republic of China has
significantly intervened in its foreign exchange markets in order to hold the
value of the yuan within its tight and artificial trading band, resulting
in enormous growth in China's dollar reserves, estimated to be over
$345,000,000,000 as of June 2003;

Whereas the practice of ``currency manipulation'' to gain a trade or
competitive advantage is a violation of the spirit and letter of the
World Trade Organization and International Monetary Fund agreements, of
which the People's Republic of China is now party;

Whereas the undervaluation of China's currency has had and continues to
have a negative impact on the United States manufacturing sector,
contributing to significant job losses and business closures;

Whereas the undervaluation of China's currency also has had and
continues to have a negative impact on the economies of its neighbor nations,
the European Community, Mexico, and Latin America;

Whereas the free fluctuation of currencies is a key component to the
health of global trade, and the stability of the world economy; and

Whereas China's central bank governor has stated that the value of the
yuan will eventually be determined by market forces rather than pegged
firmly to the dollar: Now, therefore, be it

Resolved, That the Senate of the United States--

(1) supports the Secretary of the Treasury's work with regard to the
Secretary's discussions with the Government of the People's Republic of
China leading to a market-based valuation of the yuan; and

(2) encourages the People's Republic of China to continue to act on its
commitments to the trade rules and principles of the international
community of which it is now a member.

(end text)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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