Will attend summit. Hu
Photo: AFP
Seeking global support. Obama
Photo: AFP

US delays report on China ahead of Iran sanctions talks

After Beijing announces President Hu will attend nuclear security summit meeting in Washington, Treasury Secretary Geithner says delaying report on whether China manipulates its currency. Analysts: Report would have been 'slap in the face' to China

US Treasury Secretary Timothy Geithner said on Saturday he was delaying an April 15 report on whether China manipulates its currency but pledged to press for a more flexible Chinese currency policy.


The decision follows Thursday's announcement in Beijing that Chinese President Hu Jintao will attend a nuclear security summit meeting in Washington April 12-13 and seemed to be a tactic to keep tensions over currency in check.


The Obama administration is seeking broad global support for measures to curb Iran's nuclear ambitions, making it an inconvenient time to risk inflaming the political dispute over China's currency policy.


Analysts said it would have been "a slap in the face" to Beijing if Washington had labeled China a currency manipulator days after Hu's visit.


Geithner, who said on Friday he believed China will soon realize it was in its own best interest to end its pegged currency policy, also tried to mollify US lawmakers by saying he will use upcoming meetings of the Group of 20 and a US-China economic summit in Beijing in May to try to get China to move.


"I believe these meetings are the best avenue for advancing US 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.


Early reaction from lawmakers, who have focused in recent weeks on China's currency policy as a primary contributor to huge US trade deficits, was negative.


Republican Sen. Charles Grassley, ranking minority member on the US Senate Finance Committee, said Treasury's decision effectively belittles US influence because China's policy of pegging its yuan, or renminbi, to the dollar was blatantly manipulative and said Beijing should be called on it.


"If we want the Chinese to take us seriously, we need to be willing to say so in public," Grassley said in a statement.


A declaration that China manipulated its currency would trigger negotiations between Washington and Beijing and potentially lead to sanctions if China refused to yield by moving toward a more flexible currency rate.


Geithner, caught between congressional anger at China and the administration's wish to engage Beijing on Iran policy, cast the issue as one of persuading China in global forums to accept greater responsibility as a key global trade partner.


'Coalition of countries'

He said China has had to engage in "increasingly large volumes of currency intervention" to maintain the peg and, in the process, was blocking other countries from letting their currencies find their natural value in respect to one another.


"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 G20 includes not only old-line rich industrial powers like the United States but also key emerging-market countries like China, Brazil and India that may be receptive to US warnings that China's policy potentially risks unleashing inflation along with rising trade tensions.


China has amassed huge volumes of foreign reserves in the process of keeping the yuan's value pegged to the dollar and its efforts to invest the reserves can cause prices to rise in global markets.


Beijing has kept the yuan steady since July 2008, after allowing it to gradually rise for the previous three years.


That angers US lawmakers who charge the Chinese practice effectively is a trade subsidy because it gives its exporters a price advantage in US and other foreign markets at the cost of American jobs.


Delaying the report -- something that happened regularly in prior administrations -- pushes the decision after Hu's visit and avoids the risk of provoking a retaliatory response from Beijing.


Geithner and Secretary of State Hillary Clinton are due to travel to Beijing in late May for a set of talks called the Strategic and Economic Dialogue and there are meetings of G20 finance ministers in Washington later this month as well as a summit of G20 political leaders in Canada in June.


That gives administration officials a chance to build momentum to encourage Beijing to let its currency find a value that more fairly reflects China's position as the third largest economy in the world.


"There was no possibility that the administration would label China a currency manipulator on the heels of Hu Jintao's visit to Washington to attend the nuclear security summit," said Bonnie Glaser, senior fellow at the Center for Strategic and International Studies in Washington.


"Look to the G20 summit in Toronto ... where President Obama may seek to build a coalition of countries that are hurt by China's undervalued currency, to step up pressure on Beijing if there has been no movement in the renminbi by then," she said.


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.


פרסום ראשון: 04.03.10, 23:47
 new comment
This will delete your current comment