China Pleases Tech With Exchange Reform

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.”

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