Nominees for key U.S. Treasury international posts pledged on Friday to work to persuade China to change its currency practices to allow critical adjustments in global trade and economic balances.
The Commerce Department, meanwhile, declined a separate request by two U.S. senators to investigate alleged manipulation of the yuan's exchange rate by Beijing.
Charles Collyns, an International Monetary Fund economist nominated to be Treasury assistant secretary for international finance, told a Senate Finance Committee confirmation hearing that Tresury must find more effective ways to persuade Beijing to modify its foreign exchange policies
"There are issues with the continued heavy intervention by the Chinese authorities, the accumulation of reserves, and the resistance of upward pressure on the exchange rate. I believe this is a major concern," Collyns said.
"If the Chinese maintain this policy, it will block the adjustment needed in the global economy and the adjustment that China needs to make to shift away from export-led growth towards domestic-led growth," he added.
However, Collyns said he understands that China did not meet the justification required by the Treasury deparment's semi-annual currency report to be formally declared a currency manipulator.
Lael Brainard, nominated to be the Treasury's undersecretary for international affairs, told the panel she expected to spend "a large part" of her time working to address imbalances associated with China's exchange rate.
"Chinese exchange rate policy ... is something that was a stabilizing force at the time of the crisis, at a time when some of the other surrounding currencies were weakening, it was a stabilizing force," said Brainard, who was a White House economic adviser in the Clinton administration and most recently a a Brookings Institution senior fellow.
"The concern now is that it is getting in the way of global recovery, that it is no longer is a positive contribution and it is leading other countries in the region to themselves be intervening more," Brainard said.
Both Republican and Democratic senators in recent days have voiced increased concerns about China's currency policy days following President Barack Obama's trip to China and other Asian countries. Sen. Charles Schumer, a New York Democrat, and Sen. Lindsey Graham, a South Carolina Republican, on Thursday asked the Commerce Department to investigate alleged manipulation of China's yuan.
The senators and U.S. manufacturing and labor groups say that the yuan is deliberately undervalued to give Chinese exporters a global price advantage, costing American jobs.
The Commerce Department on Friday demurred from their request, saying it is charged only with investigating charges that subsidized imports of specific products are harming specific industries.
"The law, passed by Congress, does not permit Commerce to make determinations across industries or across the entire economy. In any case, determining currency manipulation is squarely under the purview of the Department of Treasury," Commerce Department spokeswoman Parita Shah,
Sen. Charles Grassley, the finance committee's top Republican, complained to the nominees that the Obama administration had taken the same soft approach toward the yuan's value as the Bush administration did.
"I'm frustrated. I believe we should be calling a spade a spade. China is manipulating its currency in order to maintain its export advantage," Grassley said.
Senator Kent Conrad said he agreed with Grassley that China was manipulating its currency to manage its economy and added, "It's an absolute obligation of ours to press back."
The committee did not grill Brainard, however, on the results of a tax inquiry that delayed her nomination hearing for several months. In a memo, the panel disclosed concerns it raised over deductions Brainard had made for a home office, late payment of some property taxes and verification of legal status for household employees.
Instead, Grassley, who pressed the inquiry following a controversy in January over Treasury Secretary Timothy Geithner's late payment of some $48,000 in back taxes and penalties, criticized the Obama administration's nominee record on tax compliance.
(Reporting by David Lawder; Editing by Kenneth Barry)
