Asia-Pacific

US Senate unlikely to follow House on China yuan

(Agencies)
Updated: 2010-10-25 11:40

WASHINGTON - The US Senate is unlikely to take up pending China currency legislation following a weekend promise by the Group of 20 economic powers to shun currency devaluations for trade advantage, analysts said on Sunday.

Finance ministers from G20 leading and emerging economies agreed at a weekend meeting in South Korea to "refrain from competitive devaluations" of their currencies and to pursue a full range of policies to reduce excessive external imbalances.

Congressional elections will be held in the United States on November 2, and only a few weeks are planned for a post-election session in which the US Congress has to tackle major spending and income tax issues.

There was little chance even before the G20 meeting that the Senate was going to act on legislation passed by the House of Representatives aimed at pressuring China to raise the value of its currency.

The G20 agreement buys US Treasury Secretary Timothy Geithner some time to pursue a diplomatic approach with Beijing over the value of the yuan.

"I think he bought some time with the Congress," said Donald Straszheim, senior managing director for China research at ISI Group in Los Angeles. "The Senate isn't going to take this up in a lame duck session. There is just too much potentially to lose and not enough to gain. They'll leave this until the next Congress."

The November 2 elections will determine which party controls the next Congress, which will be seated in January. Republicans are poised to make big gains and possibly take control of the House. Democrats are likely to retain slim control of the Senate with Republicans expected to pick up a number of seats.

"I don't think they (the Senate) are ever going to take it (the China currency legislation) up," said Paul J. Markowski of Global Strategies-Analysis Group/MES Advisers, a New York consulting group.

The main aim of the two days of finance minister talks, which precede a G20 summit in Seoul on November 11-12, was to ease the currency strains that some economists feared could escalate into trade wars.

US officials said they were pleased with the main points of the G20 agreement -- although it stopped short of setting any targets to reduce trade imbalances.

There was little reaction on Sunday from lawmakers who claim China's yuan is misaligned in value, distorting trade and stealing US jobs.

The House-passed legislation would threaten China with tariffs on some of its goods unless there was significant upward movement in the value of the yuan.

A number of international analysts have said threatening China would be counterproductive and Geithner has pursued a more diplomatic approach.