U.S. yuan critics urge Obama keep campaign promise

* Hint in China central bank report viewed with skepticism

* Obama held Bush to tough standard on currency

* U.S. coalition wants more duties on Chinese goods

By Doug Palmer

WASHINGTON, Nov 11 - U.S. critics of China's currency policy said on Wednesday they were skeptical of a hint from Beijing that it could soon let its yuan rise against the dollar again after an 18-month hiatus.

The critics, representing U.S. business and labor groups, also urged President Barack Obama to live up to his campaign promise last year, when he said he would "insist that China stop manipulating its currency because it's not fair to American manufacturers, it's not fair to you and we are going to change it when I am president of the United States of America."

(For a video of Obama's speech last year on China trade to the Alliance for American Manufacturing, see: http://kdka.com/video/?id=40232@kdka.dayport.com)

In its third-quarter monetary policy report, the People's Bank of China on Wednesday departed from well-worn language on keeping the yuan <CNY=CFXS> "basically stable at a reasonable and balanced level". For details, see [ID:nSP466424]

The central bank hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

U.S. manufacturers complain that Beijing deliberately keeps its currency undervalued against the dollar to give its companies an unfair trade advantage that is reflected in the huge U.S. trade deficit with the Asian manufacturing giant.

Scott Paul, executive director of the Alliance for American Manufacturing, said he suspected the People's Bank of China report was aimed at defusing tensions on the currency issue before Obama arrives next week in China for talks.

"After many years of observing how China proceeds on this, I'm reluctant to give them much credit other than making a shrewd political move ahead of Obama's visit," Paul said.

Lloyd Wood, a spokesman for the Fair Currency Coalition, said they would keep pushing for legislation that Obama supported when he was a senator to give U.S. companies new tools to fight China's currency practices.

"Our attitude is actions speak later than words. Until we see some appreciable change (in China's exchange rate and huge trade surplus with the United States), digging a deeper hole at a slower rate is not going to solve the problem," Wood said.

OBAMA CALLED BUSH INACTION "UNACCEPTABLE"

In an interview with Reuters earlier this week, Obama said he planned to bring up China's currency, "along with a host of other issues," when he meets with Chinese leaders in Beijing.

Despite his fiery campaign rhetoric, Obama has refused in two Treasury Departments reports since taking office to brand China as a currency manipulator, and when asked about that in the interview he parried the question. [ID:nN09278455]

"I think it is important as president of the United States, as we enter into these discussions, that we are looking at all the issues involved and not just one," Obama said.

But last year on the campaign trail, he held his predecessor, George W. Bush, to a much tougher standard.

"Each year they've had the chance, the Bush administration has failed to do anything about it and that's unacceptable. That's why I co-sponsored the Currency Exchange Rate Oversight Reform Act. And that's why as president I'll use all the diplomatic avenues open to me to insist that China stop manipulating its currency," Obama said in the April 2008 speech to the Alliance for American Manufacturing.

The bill Obama said he supported required the Treasury Department to identify countries with "misaligned currencies," and then allowed the Commerce Department to slap anti-dumping duties on imports from those countries if the currency misalignment was not corrected within 180 days.

The legislation also called for the United States to file a World Trade Organization complaint against countries that persistently misalign their currency.

Another bill Obama co-sponsored when he was in the Senate would designate currency misalignment as a subsidy under U.S. trade laws to make it easier for companies to request anti-dumping and countervailing duties on Chinese imports.

The Fair Currency Coalition, which includes labor, steel, textile and other groups, continues to push for that bill and has collected 75 co-sponsors in the House of Representatives and seven in the Senate so far this year.

They want Obama to back the bill now as president.

"China is incredibly dependent on exports to drive its economy and any potential disruption of those exports is going to get China's attention. Until the Obama administration is willing to use that leverage, China won't be under any real pressure to change its policy," Wood said.