Mon, Oct 25, 2010 - Page 10 News List

China to continue toward yuan flexibility: Geithner

REUTERS, GYEONGJU, SOUTH KOREA

US Treasury Secretary Timothy Geithner said China would continue to move toward exchange rate flexibility and is now actively engaged on global foreign exchange issues.

Geithner, in an interview with Bloomberg Television after G20 finance leader meetings concluded in Gyeongju on Saturday, said China views a higher yuan rate versus the dollar as in Beijing’s interest because it does not want the US Federal Reserve to control its monetary policy.

“They’re an independent country, a large economy. They need the flexibility to run their policies in a way that makes sense for China,” Geithner said.

“And that requires that their exchange rate move up over time as they’re now doing and we want to see that continue. They’ve got a ways to go, but I think they’re committed to do that,” he said. “I think you’re going to see them continue to move.”

Geithner’s comments in the interview came hours before he traveled to Qingdao, China, to meet with Chinese Vice Premier Wang Qishan (王歧山) to discuss unspecified bilateral economic matters.

The US Treasury chief has delayed a decision on whether to declare that China manipulates its currency for export advantage. Global economists and US lawmakers contend that China’s yuan is at least 20 percent undervalued.

The semi-annual Treasury currency report was due on Oct. 15, but Geithner opted to delay it to press his case at multilateral meetings, including Gyeongju and a Nov. 5 and Nov. 6 G20 leaders summit in Seoul.

At the Gyeongju meeting, the G20 members pledged to shun competitive currency devaluations and reduce current account imbalances, though they stopped short of numerical goals based on percentages of gross domestic product.

Geithner said it was significant that the G20 directly addressed currencies with cooperation from China and other key emerging markets.

“We’ve had a long period where the major economies, principally Japan, Europe and the United States, bore all the burden of cooperation on exchange rate questions. They dominated all those discussions,” Geithner said. “But the world’s changed dramatically and it’s very important that we’re discussing these things with China, with India, with Brazil, with the emerging market economies all around the world that are growing so rapidly.”

In the past, Beijing had resisted specific mentions of currency rates in G20 statements.

Geithner added that a numerical goal for current account surpluses and deficits may eventually settle to around 4 percent of GDP.

“You’ve heard people talk about that and my own personal view is that will become the benchmark for the future,” Geithner told Bloomberg TV. “That’s because if you look at what major economies project going forward — what they expect to happen if they pursue the policy they have been pursuing, most countries see the balances either staying below 4 percent, or falling to 4 percent over the medium term.”

China projects a current account deficit of 4 percent or less over the next three to five years as its economy grows.

Turning to complaints about easy US monetary policy, Geithner said most G20 countries understand the need for the US to maintain policies to boost growth.

“The countries around the room understand that imperative. They of course recognize that the future growth depends a lot on how successful we are ... in digging out of this hole more rapidly,” he said.

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