Geithner Buys China Time on Currency Review

Monday, 05 Apr 2010 09:28 AM

 

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U.S. Treasury Secretary Timothy Geithner has delayed an April 15 report on whether China manipulates its currency but pledged to press for a more flexible Chinese currency policy.

The decision may help thaw relations two weeks before China's president was due to visit Washington.

However, Geithner also tried to soothe angry U.S. lawmakers by saying he will use upcoming meetings of the Group of 20 and a U.S.-China economic summit in Beijing in May to try to get China to move.

"I believe these meetings are the best avenue for advancing U.S. interests at this time," Geithner said in a statement issued at midday on the Easter holiday weekend.

Treasury gave no indication when it will actually release the report.

The U.S. Treasury chief, who had faced rising pressure from Capitol Hill to take a stiffer line with China in the semi-annual report on April 15 by naming it a manipulator, cast the issue as one of persuading China to accept greater responsibility as a key global trade partner.

"China's inflexible exchange rate has made it difficult for other emerging-market economies to let their currencies appreciate," he said.

"A move by China to a more market-oriented exchange rate will make an essential contribution to global rebalancing." The April 15 report had been due just days after Chinese President Hu Jintao was scheduled to visit Washington for a nuclear security summit hosted by President Barack Obama.

Lawmakers have stepped up demands for Treasury to brand China a manipulator, saying that Beijing deliberately keeps the value of its yuan low against the dollar to give its exporters a trade advantage that costs U.S. jobs.

Delaying the report — something that happened regularly in prior administrations — will push the decision to well after Hu's visit, avoiding an embarrassing situation that could provoke a retaliatory response from Beijing.

It also allows the Obama administration some breathing room to try to persuade Chinese officials to voluntarily allow the yuan to rise.

The yuan has been stuck at its current level of around 6.8 to the dollar since July 2008, when the financial crisis worsened, following a three-year period of gradual increases.

Geithner implied that China's current policy was unfair to others, citing Germany and Japan's efforts to spur their domestic demand while maintaining floating exchange rates.

"Surplus economies with inflexible exchange rates should contribute to high and sustained global growth and rebalancing by combining policy efforts to strengthen domestic demand with greater exchange rate flexibility," he said.

"This is especially true in China," he added, noting that China managed to come through the financial crisis that wreaked havoc on other countries' economies while maintaining a 9 percent rate of economic growth in 2009.

© 2014 Thomson/Reuters. All rights reserved.

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