China Pleases Tech With Exchange Reform
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In a move designed in part to appease White House and congressional free- trade critics, China agreed Thursday to stop pegging the value of its currency to the U.S. dollar. Permitting the yuan to float at market value is a long-standing goal of the technology industry.
With the approval of the highest levels of Chinese government, the People's Bank of China (PBC) said effective Thursday, China will tie the yuan's value to a managed floating exchange rate regime based on market supply and demand.
The tech industry claims China's previous refusal to change its currency exchange rate created an unfair advantage for Beijing in world markets by keeping the price of its exports artificially low.
"This is unalloyed good news, and I think it will help ratchet down the growing anti-China sentiment in Congress," Rhett Dawson, president of the Information Technology Industry Council (ITI), said in a statement. "The Bush administration's steady persistence on this issue has paid off."
Beginning with delaying IBM's sale earlier this year of its PC division to China-based Lenovo, Congress has grown increasingly belligerent about trade policy with Beijing. Some lawmakers blame China's currency policy as a chief cause of the America's record trade deficit.
Dawson said that while Beijing's move was encouraging, other trade barriers still exist over piracy and software procurement practices.
"This is a great step. No question," he said. "That said, we have to make sure that China continues to make progress in other areas, including intellectual property enforcement and making good on their World Trade Organization commitments."
In May, the USTR placed China on the United States' Priority Watch List for intellectual property theft.
Meeting last week in Beijing, Unites States Trade Representative (USTR) Rob Portman reported "measured progress" in talks about lowering China's 90 percent piracy rate and forcing nondiscriminatory practices in government purchases of software.
Following its negotiations with Portman, Beijing announced it would begin criminal prosecutions of pirates and increase market access to U.S. software companies. Portman praised Beijing but added that "very serious concerns" still remain.
Thursday, Dawson echoed Portman's comments.
"We want to sell as many tech products as possible to China, but we can only do that by knocking down the barriers to a level playing field."