Washington: US treasury secretary Timothy F. Geithner delayed a scheduled 15 April report to the US Congress on exchange-rate policies, sidestepping a decision on whether to accuse China of manipulating the value of the yuan.
Exercising caution: US treasury secretary Timothy Geithner. Analysts say the delay could be a politically smart thing to do with Hu Jintao planning to be in Washington for talks with President Barack Obama. Daniel Acker / Bloomberg
Geithner in a statement on Saturday urged China to move towards a more flexible currency and said a series of meetings over the next three months will be critical to bringing policy changes that lead to a stronger, more balanced global economy. The delay comes as Chinese President Hu Jintao is scheduled to visit Washington for a nuclear summit from 12-13 April.
The treasury chief faces demands from Congress to label China a currency manipulator for keeping the value of the yuan little changed from around 6.83 to the dollar for almost two years. Geithner is instead betting that China will take steps on its own in the next several months to strengthen its currency, analysts said.
“There is pressure within China for a yuan revaluation and, as long as exports continue to rebound, there is a good chance that it will happen,” said Elizabeth Economy, director of Asia studies at the Council on Foreign Relations in New York. “If, however, there is a lot of public pressure emanating from the US, that will likely give support to those in the Chinese government who do not want to see a revaluation.”
Geithner’s statement said countries such as China with inflexible exchange rates can promote global growth by combining policy efforts to strengthen domestic demand with greater exchange-rate flexibility.
“A move by China to a more market-oriented exchange rate will make an essential contribution to global rebalancing,” he said.
Both Democrat and Republican lawmakers said Geithner is wrong to expect that negotiations will prompt such a move from China’s leaders. With the US unemployment rate hovering near a 26-year high, some lawmakers say China’s policies give its exporters an unfair advantage over their US competitors.
“We are disappointed, but not surprised, by the administration’s decision,” senator Charles E. Schumer, a New York Democrat, said in an emailed statement on Saturday. “After five years of stonewalling, punctuated by occasional, but halting action by the Chinese, we have lost faith in bilateral negotiations on this issue.”
Schumer, along with four other senators including South Carolina Republican Lindsey Graham, last month introduced legislation to require the treasury to determine if a nation had a currency misaligned with the dollar and make it easier to respond by imposing import duties.
The treasury’s delay underscores the urgent need for Congress to pass such legislation, said Alan Tonelson, research fellow with the US Business and Industry Council, a Washington-based organization representing about 2,000 manufacturing companies.
“There can be no question that attempts to negotiate an end to China’s currency manipulation have failed for eight years and it is long past time for unilateral US responses,” Tonelson said in an interview on Saturday.
Schumer, a member of the Senate Finance and Banking committees, said in his statement he intended to push forward with his legislation.
Still, Yu Yongding, a former adviser to the People’s Bank of China, welcomed Geithner’s decision as of course good news, adding that confrontation is meaningless.
Problems between China and the US can be solved through negotiations, Yu said in a telephone interview from India on Sunday.
“The past few years have proven that denying the problem doesn’t solve anything,” senator Charles Grassley of Iowa, the top Republican on the Senate Finance Committee, said in an emailed statement. “The treasury department should cite China as a currency manipulator.”
Representative Sander Levin of Michigan, the Democratic chairman of the House Ways and Means Committee, was more supportive.
The delay “is for a definite period and for a defined purpose,” Levin said. “If the multilateral effort does not result in China’s making significant changes, the administration and Congress will have no choice but to take appropriate action.”
Geithner, in an 2 April interview on Bloomberg Television, expressed confidence that China will decide a stronger yuan is in the country’s interest, saying the US is trying to maximize the chance that they move quickly to let the yuan appreciate.
Last month, Chinese executives, in interviews with Bloomberg, joined in backing a stronger yuan, even as Premier Wen Jiabao said the currency isn’t undervalued.
Yang Yuanqing, chief executive officer of Beijing-based computer maker Lenovo Group Ltd, said gains would boost consumers’ purchasing power. Qin Xiao, chairman of China Merchants Bank Co., said an end to the yuan’s 20-month peg to the dollar would let lenders set market-based interest rates. Chen Daifu, chairman of Hunan Lengshuijiang Iron and Steel Group Co., said a stronger currency would cut import costs.
Yuan forwards posted their biggest weekly gain in almost three months on mounting speculation China will loosen its grip on the currency after data showed an economic recovery is gathering pace.
While a stronger yuan will help cut costs in imported fertilizers and pesticides, some agricultural sectors may face a collapse if exchange-rate pressures climb, the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-Products, said in a 2 April report on its website.
The treasury hasn’t labelled any country a currency manipulator since 1994. The treasury’s currency report has been delayed in the past under both Democratic and Republican administrations.
The latest delay is probably the politically smart thing to do, with Hu planning to be in Washington for talks with President Barack Obama, said Charles Freeman, a China expert at the Center for Strategic and International Studies in Washington.
Rebecca Christie, Peter Cook Chua Kong Ho and Simon Kennedy, Zhang Dingmin in Beijing contributed to this story.