China slams US allegations of exchange rate subsidies

CHINA dismissed allegations by US producers over its exchange rate as "groundless" yesterday, as Washington said there was no evidence that the undervalued yuan constituted a state subsidy.

The US Commerce Department said on Tuesday it found insufficient evidence to probe allegations that China's undervalued currency is the equivalent of a state subsidy to its manufacturers.

The allegations were made by US producers angry about imports of aluminum products and coated paper from China.

"We noted the ruling made by the US Commerce Department... according to the related agreements of the World Trade Organisation, foreign exchange issues do not constitute subsidies," China's Commerce Ministry said.

"We hope the US side will continue to follow WTO rules on cases of trade remedy and carry out (trade) probes in a prudent way," it said in a statement, adding that specific allegations against the Chinese products were "groundless."

Despite the US ruling, the commerce department still announced that 514 million dollars worth of Chinese aluminum exports to the United States were unfairly subsidised.

It said it would impose countervailing duties of up to 137.65 per cent on Chinese exports of aluminum products used for window and door frames, gutters, cars, trucks, boats and furniture parts.

The department has declined to investigate complaints about China's currency practices in 11 cases in the past, despite often-voiced criticism from the US that China keeps its currency undervalued for trade gains.

Staff at the International Monetary Fund also say the yuan is "substantially undervalued" against the dollar but do not cite any particular levels.

Some economists think the yuan is undervalued by between 25 and 40 per cent, giving Chinese exporters an unfair price advantage. US lawmakers have been pressing for legislation that would require the Commerce Department to apply punitive sanctions against China and other countries with allegedly undervalued currencies.AFP