US Secretary of the Treasury Timothy Geithner said on Friday there has been a “substantial” inflation--induced appreciation in the yuan that Beijing would do well to recognize and counter.
“Because Chinese inflation is accelerating more rapidly than US inflation, the right measure of the pace of appreciation is now more than 10 percent a year, and that is a very substantial, material change,” Geithner told reporters at the White House.
In a continuing bid by US President Barack Obama’s administration to persuade China to let the yuan’s nominal value rise more rapidly, Geithner opened a new tack earlier this week by saying it would be in China’s own interest to do so in order to tamp down inflation in its own economy.
The so-called “real” exchange rate is adjusted to account for the substantial difference between Chinese and US inflation — 5 percent versus about 1 percent respectively.
Geithner told an audience on Tuesday that the current “real” pace of appreciation would help correct an exchange-rate imbalance with the US dollar, but at an unnecessarily severe cost to China.
A stronger yuan in nominal terms could help cap Chinese inflation, Geithner contends.
Geithner spoke to reporters ahead of a meeting at the White House between Obama and Chinese President Hu Jintao (胡錦濤) on Wednesday.
In nominal terms, the yuan has risen 3.6 percent since China dropped a peg to the US dollar in June last year, touching a record high on Friday.
“The exchange rate has moved up a little over 3 percent ... against the dollar since June of last year. That is an annual rate of about 6 percent, maybe 7, 8 percent a year,” Geithner said. “But that is not the best measure of competitiveness ... [which] is the combined effect of that change and the difference between China’s inflation rate and ours.”
Meanwhile, Hu will bring new business deals and possible commitments to buy US beef and software when he visits Washington next week, a US business group said on Friday.
“He will come with gifts,” Myron Brilliant, senior vice president of the US Chamber of Commerce, told reporters. “There are many companies that will be signing contracts.”
China has a pattern of tying business deals to high-level visits to try to generate political goodwill.
Brilliant declined to comment on the commercial value of contracts to be signed next week, but said the ceremony would take place at the White House.
Other industry officials also hesitated to estimate the dollar value of the contracts.
“It’s very fluid. I don’t think even the Chinese know,” one industry aide said.
Hu and Obama are expected to drop by a meeting between 15 US and five Chinese chief executives at the White House on Wednesday.
The US side is likely to include senior officials from Coca-Cola, General Electric, Microsoft, Boeing and Dow Chemical.
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