On February 4, 2011, the U.S. Department of the Treasury issued its annual "Report to Congress on International Economic and Exchange Rate Policies" in which it concluded that "no major trading partner of the United States" qualifies as a currency manipulator. With respect to China, the report noted that "the renminbi remains substantially undervalued," but concluded that China is not a currency manipulator due to some appreciation of the renminbi ("RMB") since June 2010 and a commitment by Chinese President Hu in his January 2011 U.S. visit to "continue to promote RMB exchange rate reform and enhance RMB exchange rate flexibility." The report also emphasized that many Chinese believe that it is in their country's own interest to allow exchange rate flexibility in order to help change the pattern of growth in its economy. Under Section 3004 of the Omnibus Trade and Competitiveness Act of 1988, if the Treasury Department were to identify a country as a currency manipulator in the report, then it would be required to initiate negotiations with that country "on an expedited basis" to remedy the resulting trade imbalance. Because the Treasury Department did not identify China as a currency manipulator, no such expedited negotiations will take place.

Subsequent to issuance of the report, Treasury Secretary Tim Geithner commented publicly on various occasions about the burdens placed on other economies by China's undervalued currency and tightly controlled exchange rate. Notably, in a February 7 speech in Brazil, Secretary Geithner pointed to the increasing value of the Brazilian currency and rising capital inflows into the Brazilian market as evidence that emerging economies with flexible exchange rates are being harmed by countries with deliberately undervalued currencies. At the G-20 meeting of Finance Ministers in Paris on February 18-20, Brazilian Finance Minister Guido Mantega agreed that China's undervalued currency is a problem but also suggested that international currency problems are not limited to China.

Closer to home, a bipartisan group of Senators and Representatives, increasingly frustrated by the Obama Administration's handling of the China currency issue, has again introduced legislation to address the matter. On February 10, Senators Sherrod Brown (D-OH) and Olympia Snowe (R-ME), along with Representatives Sander Levin (D-MI), Tim Murphy (R-PA), and Tim Ryan (D-OH) introduced in the Senate and in the House of Representatives the Currency Reform for Fair Trade Act of 2011. Similar to legislation that passed the House but not the Senate last year, the bill would make prolonged currency undervaluation actionable as an export subsidy under U.S. countervailing duty law. Although the bill could potentially apply to any country that is manipulating its currency, the bill's sponsors made clear that the it is intended to combat China's currency policies and cited an economic analysis suggesting a 20-40 percent appreciation of the RMB would result in a significant improvement in the U.S. trade deficit and increased U.S. employment. More recently, the Senate Democratic leadership has made passage of this or similar legislation a priority on their legislative agenda this year.