US attacks China peg for trade deficit

By Andrew Balls and Christopher Swann in Washington
Published: February 13 2006 19:25 | Last updated: February 14 2006 03:25

China’s “tightly managed pegged exchange rate” and “foreign exchange market intervention to limit currency appreciation” are partly to blame for the US’s record trade deficit, the Bush administration says in a flagship economic report.

The 2006 Economic Report of the President said China’s foreign exchange reserves had continued to rise, in spite of the announcement of a new currency regime in July.

The administration used blunt language on China’s exchange rate management, which it said was contributing to imbalances in China and in the global economy. “Saving is encouraged, in effect, because consumption is discouraged by China’s exchange rate policy,” it said.