WASHINGTON (AP) — The Treasury Department said on Friday that China had made progress in allowing its currency to rise against the dollar and declined to accuse the nation of manipulating its currency to gain a trade advantage.
The department’s decision should help avert a trade dispute. But the department said China’s currency was still undervalued and must rise further against the dollar.
The renminbi has gained 8 percent against the dollar in the last two years. A currency with a lower value gives China a trade advantage by making its exports cheaper and imports from the United States more expensive.
If the department found that China was manipulating its currency, the Obama administration would have had to initiate negotiations with China. If those talks failed, the United States could have imposed trade sanctions.
Some American manufacturers have urged the administration to take punitive steps to force China to allow the renminbi to trade freely. The renminbi now trades within a narrow range against the dollar.
Mitt Romney, the presumptive Republican presidential nominee, has said that he would label China a currency manipulator on his first day in office.
The Treasury Department said China had made commitments in recent negotiations, including some at high-level meetings this month, to make its exchange rate more flexible.
In April, China widened the daily amount the renminbi was allowed to fluctuate to 1 percent, from 0.5 percent. That move came just before Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Rodham Clinton met President Hu Jintao of China for high-level talks in early May in Beijing.
Mr. Geithner told Mr. Hu during those meetings that China’s loosening of the range was “very promising.”
The United States has urged China to let its currency appreciate for almost a decade. In 2005, China ended its tight peg of the renminbi to the dollar and permitted the renminbi to trade within a narrow range. Since then, the renminbi has appreciated 40 percent in inflation-adjusted terms, the department said.
The United States trade deficit with China widened in March, the Commerce Department said this month. The deficit with China this year is on pace to exceed last year’s gap of $ 295.5 billion, a high for any country.