US moves to avert China clash

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The United States' complex trade relations with China were laid bare Friday as Washington struggled to balance pre-election anger at home with efforts to give US firms a fair shake against Chinese rivals.

Amid rising anger that Chinese policies are putting Americans out of work, US officials moved to forestall a currency battle with Beijing while probing its subsidies to green technology companies.

The Treasury Department delayed publishing a controversial report on China's currency policies until after mid-term elections and a key G20 meeting in mid-November.

The report, which could have labeled China a currency manipulator and opened the path for US sanctions on Chinese goods, was due to be released by Friday.

The delay avoids the prospect of a bitter trade dispute between two powers, who have faced off over accusations that Beijing keeps the yuan undervalued to gain an unfair trade advantage.

Currency tensions boiled over at last week's annual meetings of the International Monetary Fund (IMF), with China rejecting calls for a quick yuan revaluation.

But ahead of the Group of 20 meetings, the Treasury Department sounded a conciliatory tone, recognizing "China's actions since early September to accelerate the pace of currency appreciation, while noting it is important to sustain this course."

A higher valued yuan would make Chinese exports more expensive and exports from other nations more competitively priced.

Treasury Secretary Timothy Geithner has come under pressure from US lawmakers to move toward sanctions on Chinese goods, after Beijing's reluctance to change its stance, but since September, he said, things have changed.

"Since September 2, 2010, the pace of appreciation has accelerated to a rate of more than one percent per month. If sustained over time, this would help correct what the IMF has concluded is a significantly undervalued currency," the statement said.

According to Treasury figures, the yuan has appreciated around three percent since Beijing vowed to let the value of the currency rise in June.

But the Treasury Department's satisfaction was not shared by US lawmakers, just weeks before local elections.

"It is unconscionable to me that Treasury has again chosen to delay," said Democratic Congressman Mike Michaud, who chairs the House trade working group.

"Their decision to do so simply underscores the administration's unwillingness to get tough on China's unfair currency policies."

But the ire caused by the Obama administration's delay was directly offset by news that the US Trade Representative would probe claims that China is handing out hundreds of billions of dollars in illegal subsidies in a bid to dominate the green-energy sector.

"This administration is committed to ensuring a level playing field for American workers, businesses and green technology entrepreneurs," US Trade Representative Ron Kirk said in a statement announcing the investigation.

The probe comes after the United Steelworkers union petitioned trade officials to investigate practices it claims contravene World Trade Organization (WTO) rules and cost American jobs.

The union -- one of the nation's largest -- accused China of blocking access to materials used in green technologies, illegally linking subsidies to export sales, curbing imports and demanding foreign investors hand over technology secrets.

It also accused China of providing more than US$216 billion' worth of subsidies to green technology makers -- "more than twice as much as the US spent in the sector and nearly half of the total "˜green' stimulus spent worldwide," according to a September plea filed by the union.

If the probe finds that China did provide illegal subsidies, the United States can take its case to the WTO, where China could face sanctions.

"The Obama administration's quick decision to move forward on unfair Chinese trade practices in the green technology sector... is a strong signal of support for US businesses and workers," said Democratic Congressman Sander Levin, who chairs the powerful Ways and Means committee.

The issue of balanced trade is expected to dominate a series of meetings of G20 leaders, economy ministers and central bankers next month.

Europe, Japan and the United States have all pressed China to overhaul its weak yuan policy, while shifting to a less export-driven economy that would stimulate domestic demand.

"These meetings provide an opportunity to make additional progress on the important challenge of securing stronger and more balanced growth," the Treasury Department said.

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