U.S. Treasury nominees to press China on yuan policy

By David Lawder

WASHINGTON (Reuters) - Nominees for key U.S. Treasury international posts pledged on Friday to work to persuade China to change its currency practices to allow critical adjustments in global trade and economic balances.

The Commerce Department, meanwhile, declined a separate request by two U.S. senators to investigate alleged manipulation of the yuan's exchange rate by Beijing.

Charles Collyns, an International Monetary Fund economist nominated to be Treasury assistant secretary for international finance, told a Senate Finance Committee confirmation hearing that Tresury must find more effective ways to persuade Beijing to modify its foreign exchange policies

"There are issues with the continued heavy intervention by the Chinese authorities, the accumulation of reserves, and the resistance of upward pressure on the exchange rate. I believe this is a major concern," Collyns said.

"If the Chinese maintain this policy, it will block the adjustment needed in the global economy and the adjustment that China needs to make to shift away from export-led growth towards domestic-led growth," he added.

However, Collyns said he understands that China did not meet the justification required by the Treasury deparment's semi-annual currency report to be formally declared a currency manipulator.

Lael Brainard, nominated to be the Treasury's undersecretary for international affairs, told the panel she expected to spend "a large part" of her time working to address imbalances associated with China's exchange rate.

"Chinese exchange rate policy ... is something that was a stabilizing force at the time of the crisis, at a time when some of the other surrounding currencies were weakening, it was a stabilizing force," said Brainard, who was a White House economic adviser in the Clinton administration and most recently a a Brookings Institution senior fellow.