US Treasury delays report on currency exchange rates
Sunday, 7 November 2010
Merle David Kellerhals Jr. in Washington
THE US Treasury delayed publishing a report on China's currency policies until after the Group of 20 advanced economies meets in Seoul November 11.
The congressionally mandated report, required twice a year, is designed to determine whether any countries are manipulating their currencies and exchange rate policies. The United States has been concerned that China may have been manipulating its currency, the yuan, against the U.S. dollar to gain an unfair trade advantage.
"Secretary of the Treasury Timothy Geithner recognized China's actions since early September to accelerate the pace of currency appreciation [against the dollar], while noting it is important to sustain this course," the Treasury said in a prepared statement in the middle of last month.
"By continuing to implement reforms to strengthen domestic demand and by allowing the exchange rate to move higher to reflect fundamental economic forces, China will make a significant positive contribution to the global rebalancing effort, help reduce pressure on those emerging market economies that have more flexible exchange rates, and provide a more level playing field for trading partners around the world," the Treasury statement said.
Since June 19 when China announced it would renew reform of its exchange rate and allow it to move higher in response to market forces, the Chinese currency has appreciated by roughly 3.0 per cent against the U.S. dollar. Since September 2, the pace of appreciation has accelerated to a rate of more than 1.0 per cent per month.
"If sustained over time, this would help correct what the [International Monetary Fund] has concluded is a significantly undervalued currency," the Treasury statement said.
On June 19, President Obama said, "China's decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy."
In July 2008, during the global economic slowdown, China once again fixed the value of the yuan to the dollar after having let it slowly move previously. The policy helped to protect its export market as global demand for consumer goods declined. Critics argued that the policy unnaturally undervalued the yuan, making China's exports cheaper and giving Chinese companies an unfair advantage over their foreign competitors, which led to job losses outside China.
By including several other currencies besides the U.S. dollar to determine its value, the yuan is expected to grow stronger and be able to appreciate in value against the U.S. dollar.
In his June 19 statement, Geithner urged "vigorous implementation" of China's more flexible currency policy. By doing so, China "would make a positive contribution to strong and balanced global growth," he said.
According to the U.S. Commerce Department, the U.S. trade deficit with China rose 8.2 per cent in August to $28 billion, which exceeded the record $27.9 billion set in October 2008. Commerce economists said the U.S. trade deficit with China this year is running at approximately 20.6 percent above the rate set in 2009.
Geithner and other U.S. officials had been urging China to reform its exchange rate mechanism. At the conclusion of the U.S.-China Strategic and Economic Dialogue in Beijing May 25, Geithner said Chinese leaders had recognized that such changes constituted an important part of their country's broader economic reform agenda.
"Allowing the exchange rate to reflect market forces is important not just to give China the flexibility necessary to sustain more balanced economic growth with low inflation, but also to reinforce incentives for China's private sector to shift resources to more productive, higher-value-added activities that will be important to future growth," he said. The Treasury said the G20 meeting November 11-12 in Seoul will give world leaders an opportunity to make progress on securing stronger and more balanced economic growth in the aftermath of the worst recession since the Great Depression of the 1930s.
Obama met with Chinese Premier Wen Jiabao on the sidelines of the U.N. General Assembly in New York September 23 and discussed currency concerns and exchange rates in a broader discussion of trade relations, says Jeffrey Bader, an Obama adviser and senior director for Asian affairs on the National Security Council. He said Wen reiterated China's intention to continue with gradual reform of its exchange rate mechanism.
The U.S.-China Strategic and Economic Dialogue meets twice a year to work through a range of bilateral and multilateral issues. Obama and Chinese President Hu Jintao are expected to meet again at the G20 leaders' meeting in Seoul and the Asia-Pacific Economic Cooperation forum, which follows the G20 meetings in Yokohama, Japan.
This is a product of the Bureau of International Information Programs, U.S. Department of State. Courtesy: The US Embassy in Dhaka
THE US Treasury delayed publishing a report on China's currency policies until after the Group of 20 advanced economies meets in Seoul November 11.
The congressionally mandated report, required twice a year, is designed to determine whether any countries are manipulating their currencies and exchange rate policies. The United States has been concerned that China may have been manipulating its currency, the yuan, against the U.S. dollar to gain an unfair trade advantage.
"Secretary of the Treasury Timothy Geithner recognized China's actions since early September to accelerate the pace of currency appreciation [against the dollar], while noting it is important to sustain this course," the Treasury said in a prepared statement in the middle of last month.
"By continuing to implement reforms to strengthen domestic demand and by allowing the exchange rate to move higher to reflect fundamental economic forces, China will make a significant positive contribution to the global rebalancing effort, help reduce pressure on those emerging market economies that have more flexible exchange rates, and provide a more level playing field for trading partners around the world," the Treasury statement said.
Since June 19 when China announced it would renew reform of its exchange rate and allow it to move higher in response to market forces, the Chinese currency has appreciated by roughly 3.0 per cent against the U.S. dollar. Since September 2, the pace of appreciation has accelerated to a rate of more than 1.0 per cent per month.
"If sustained over time, this would help correct what the [International Monetary Fund] has concluded is a significantly undervalued currency," the Treasury statement said.
On June 19, President Obama said, "China's decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy."
In July 2008, during the global economic slowdown, China once again fixed the value of the yuan to the dollar after having let it slowly move previously. The policy helped to protect its export market as global demand for consumer goods declined. Critics argued that the policy unnaturally undervalued the yuan, making China's exports cheaper and giving Chinese companies an unfair advantage over their foreign competitors, which led to job losses outside China.
By including several other currencies besides the U.S. dollar to determine its value, the yuan is expected to grow stronger and be able to appreciate in value against the U.S. dollar.
In his June 19 statement, Geithner urged "vigorous implementation" of China's more flexible currency policy. By doing so, China "would make a positive contribution to strong and balanced global growth," he said.
According to the U.S. Commerce Department, the U.S. trade deficit with China rose 8.2 per cent in August to $28 billion, which exceeded the record $27.9 billion set in October 2008. Commerce economists said the U.S. trade deficit with China this year is running at approximately 20.6 percent above the rate set in 2009.
Geithner and other U.S. officials had been urging China to reform its exchange rate mechanism. At the conclusion of the U.S.-China Strategic and Economic Dialogue in Beijing May 25, Geithner said Chinese leaders had recognized that such changes constituted an important part of their country's broader economic reform agenda.
"Allowing the exchange rate to reflect market forces is important not just to give China the flexibility necessary to sustain more balanced economic growth with low inflation, but also to reinforce incentives for China's private sector to shift resources to more productive, higher-value-added activities that will be important to future growth," he said. The Treasury said the G20 meeting November 11-12 in Seoul will give world leaders an opportunity to make progress on securing stronger and more balanced economic growth in the aftermath of the worst recession since the Great Depression of the 1930s.
Obama met with Chinese Premier Wen Jiabao on the sidelines of the U.N. General Assembly in New York September 23 and discussed currency concerns and exchange rates in a broader discussion of trade relations, says Jeffrey Bader, an Obama adviser and senior director for Asian affairs on the National Security Council. He said Wen reiterated China's intention to continue with gradual reform of its exchange rate mechanism.
The U.S.-China Strategic and Economic Dialogue meets twice a year to work through a range of bilateral and multilateral issues. Obama and Chinese President Hu Jintao are expected to meet again at the G20 leaders' meeting in Seoul and the Asia-Pacific Economic Cooperation forum, which follows the G20 meetings in Yokohama, Japan.
This is a product of the Bureau of International Information Programs, U.S. Department of State. Courtesy: The US Embassy in Dhaka