House slaps China on currency rules

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The House voted 348 to 79 Wednesday to approve new penalties against countries that undervalue their currencies to gain an unfair trade advantage, the latest volley in a dispute that centers on China but risks a broader international battle over jobs and commerce.

The vote, which comes ahead of congressional elections in which economic issues look to figure prominently, reflects growing global anxiety over China’s economic policies.

Though the Obama administration has not taken a position on the bill, senior officials cite a growing list of aggravations, including Chinese government restrictions on what goods agencies can buy, demands that companies hand over technology and limits on the export of industrially important minerals, among other things. But some business groups and others worry that open retaliation between the two big trading partners could hurt the global economy.

Brazilian Finance Minister Guido Mantega said this week he already feels a quiet “currency war” is underway as nations try to maintain the competitiveness of their exports. Capital and investment are pouring into the faster-growing Asian and Latin American economies, putting upward pressure on those currencies. If China’s renminbi doesn’t adjust to those dynamics, it forces other countries to try to keep their currencies cheaper as well – or risk losing ground to Chinese manufacturers.

Japan took the most overt step when it recently intervened to try to halt a steady rise in the value of the yen against the dollar, but nations like Colombia and Peru have also been buying dollars to try to stem the appreciation of their currencies. Korea and Taiwan have been upping their holdings of foreign reserves, and officials in Brazil — whose currency has spiked more than 30 percent against the dollar in the past year and a half – have said they might need to become more aggressive.

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