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US and China to clash over yuan fall
The yuan dropped at the fastest pace in almost two years last week and is now 1.8pc lower against a basket of currencies than in June, when Beijing announced the end to its fixed peg against the dollar.
Western economists had seen yuan liberalisation as a sign that China is abandoning its mercantilist policy in a step-by-step move towards a floating currency, which was expected to rise. They misjudged China's motives badly.
Beijing still controls the yuan, so last week's drop reflects a policy decision. It is certain to infuriate hawks in Congress, who have called a hearing on China's currency in mid-September.
Sander Levin, chair of the House Ways and Means Committee, said the US may have to consider retaliatory sanctions. "We must ensure that the international trading system ensures fair rules of competition. There is no real question that China's deliberately undervalued exchange rate is unfair, contributes to global trade imbalances, and costs the US jobs," he said.
Many on Capitol Hill suspect that China fiddled trade data with a "one-off" deficit in March when the Obama administration was preparing its verdict on whether Beijing is a currency manipulator.