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. Last Updated: 07/27/2016

U.S. Presses China to Free Yuan

BEIJING -- U.S. Treasury Secretary John Snow said on Monday that he was convinced China was committed to letting market forces drive the yuan's value, but warned Beijing had to show progress to hold off U.S. protectionist sentiment.

Speaking at a news conference after meeting Finance Minister Jin Renqing and Zhou Xiaochuan, governor of the People's Bank of China, Snow said both had given assurances of Beijing's will to further liberalize the country's financial markets and to make continued progress toward a more flexible yuan.

China revalued the yuan by 2.1 percent in July and abandoned a peg against the dollar in favor of a managed float.

But since then, authorities have allowed the yuan to rise by less than 0.3 percent, and U.S. lawmakers are once again growing unhappy at what they call a seriously undervalued yuan.

Asked why he was confident that China would indeed let the currency range more freely, Snow said: "Governor Zhou and Minister Jin reaffirmed this fundamental commitment and reviewed with me a number of initiatives under way in financial markets, particularly with respect to the trading platform ... that are preparing the way for greater currency flexibility."

In a weeklong visit to China, Snow has been trying to simultaneously show Congress that the U.S. Treasury is toughly pushing for currency reform while also encouraging wary Chinese officials to press on with changes that U.S. officials say will boost China's domestic demand and cut America's trade deficit.

"Moving to a truly flexible exchange rate requires a lot of preparatory steps. China is seriously engaged in taking these preparatory steps," Snow said. "These are the things that give me encouragement."

The U.S. Treasury is due to report next month whether it judges China to be manipulating its currency, a finding that could result in punitive trade measures against it. Some lawmakers are separately proposing to slap tariffs of as much as 27.5 percent on China unless it unshackles the yuan.

Snow called these legislative proposals "ill-conceived" and said he was hopeful of being able to point to progress China was making towards more-open markets.

"But we need to see movement," the U.S. Treasury chief added. "Let's make no mistake about it. Congress will demand to see movement."

Snow declined to say whether the encouraging signs he had heard from Chinese officials made it less likely that China would be named a currency manipulator in next month's report.

"I don't want to foreshadow what we will conclude," Snow said. "You know what we said last time, and we're going to continue to look for signs of real progress."