Geithner presses China on currency reform
October 6, 2010 Leave a comment
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) — Treasury Secretary Timothy Geithner stepped up pressure on China to make more progress in moving toward flexible exchange rates.
Geithner said Wednesday that it is particularly important to see appreciation in countries where the currency is significantly undervalued. Geithner never mentioned China, but the speech was clearly aimed at the world’s second-largest economy.
U.S. manufacturers contend that the Chinese yuan is undervalued by as much as 40 percent, giving Chinese companies a significant competitive advantage. Geithner’s comments came in advance of upcoming global finance meetings.
Geithner said the problem was that when large economies kept their currency undervalued, it encouraged other nations to do the same.
“The collective impact of this behavior risks either causing inflation and asset bubbles in emerging economies or else depressing consumption growth,” Geithner said.
Geithner’s remarks came in a speech at the Brookings Institution where he previewed the U.S. goals for upcoming meetings of the 187-nation International Monetary Fund and its sister lending institution, the World Bank.
In addition to those talks, which begin Friday, finance officials of the Group of 20 major economies are scheduled to meet on the sidelines. The G-20 nations includes the world’s richest nations plus major emerging countries such as China and Brazil.
U.S. officials said they will push the G-20 nations to honor commitments made a year ago in Pittsburgh to work to rebalance the global economy. Doing so would promote more sustainable growth and avoid a repeat of the severe recession.
Geithner said it is critical for countries not to withdraw their stimulus support too quickly. That runs the risk of derailing the current recovery.
“The greatest risk to the world economy today is that the largest economies underachieve on growth,” Geithner said. “We need to continue providing well-targeted support for the recovery in the near term even as we put in place plans to help ensure fiscal sustainability over the longer term.”
President Barack Obama made a similar plea at the G-20 leaders’ summit in June in Toronto. However, Germany, Britain and many other G-20 nations rejected that argument. They said it was more important to get soaring budget deficits under control to calm financial markets, which had been roiled by the Greek debt crisis