Tags: US | China | Currency

U.S. Unlikely to Push China Hard on Currency

Wednesday, 19 May 2010 03:37 PM

The United States will continue nudging China at top-level talks in Beijing next week to let its yuan currency appreciate but won't push hard on the issue, senior Treasury officials indicated on Wednesday.

Treasury Secretary Timothy Geithner and the department's senior coordinator for Chinese affairs said they will urge China to see yuan appreciation as being in its own interest as well as that of the global economy.

But next Monday and Tuesday's Strategic and Economic Dialogue in Beijing is essentially cast as one in a series of gatherings between now and late June in which the Obama administration will try to gently push its point that Beijing should act .

"It's very important, and we've made very clear that a more market-oriented exchange rate would contribute to balanced, sustainable growth," David Loevinger, Treasury's senior coordinator for Chinese affairs, said at a briefing.

Earlier, Geithner similarly said currency appreciation was not just a U.S.-China issue but one that involves the whole global economy.

China has amassed huge trade surpluses and foreign reserves while becoming an exporting powerhouse. Now, the United States and others want China to boost consumption at home.

The U.S. Treasury has postponed a report on currency practices of key trade partners past a scheduled April 15 release, saying it wanted to explore the issue further at S&ED talks and at meetings of Group of 20 finance ministers in early June and G-20 political leaders later next month.

Many analysts saw that as an effective deadline for Beijing to resume letting its yuan, also called the renminbi, rise in value or risk being named a currency manipulator with potential trade sanctions to follow.

Geithner wouldn't speculate on the timing of any action.

"I don't know when they're going to move," he said in an interview on CNBC television. "But I think it's very much in their interest for them to move."

One factor complicating efforts to push China toward resuming the yuan's appreciation — a move it permitted from mid-2005 until mid-2008 but then abruptly halted — is the recent steady decline in the euro's value.

That puts China's exports to Europe at risk because a weaker euro raises import prices and is likely to increase Beijing's reluctance to let the yuan rise in value.

A Chinese Ministry of Commerce report issued on Wednesday said the yuan has risen nearly 14.5 percent against the euro so far this year and predicted it will hurt exports this year.

Loevinger linked Beijing's stated concern about the size of U.S. budget deficits with the U.S. call for China to boost consumer spending at home rather than relying on exporting its way to wealth.

"The administration is very committed, once the recovery is fully assured, to bringing the fiscal deficit down to a sustainable level," he said, which may pinch Americans' ability to be the world's most voracious buyers.

"The implication for China is that the U.S. consumer is going to play a different role in this recovery ... and it's more important than ever that China accelerate its efforts to accelerate home-grown consumption-based growth," he said.

Geithner and Secretary of State Hillary Clinton will lead a delegation of about 200 U.S. officials to the Beijing talks for the second round of meetings since the Obama administration took office.

The first meeting in Washington last summer made little impact, but U.S. officials appear to be aiming for a more significant outcome. Geithner arrives in Beijing on Sunday and will hold a working lunch with Zhou Xiaochuan. China's central bank governor, and a working dinner with Vice Premier Wang Qishan ahead of the May 24-25 sessions.

Geithner and Clinton will hold a joint press conference on Tuesday afternoon before Geithner heads back to Washington.

© 2015 Thomson/Reuters. All rights reserved.

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