Geithner Insists Chinese Yuan Remains Undervalued

Treasury secretary says Beijing has built its manufacturing sector through 'systematically subsidizing' costs of key imports as well as by keeping its exchange rate 'below fundamentals for some time.'

U.S. Treasury Secretary Timothy Geithner complained Friday that China is still keeping the renminbi below its fair value and insisted Beijing would have no choice but to let it rise.

"China does represent a really unique and formidable challenge to the global trading system," Geithner told the World Economic Forum.

He said Beijing had built its manufacturing sector at the expense of its trading partners through "systematically subsidizing" costs of key imports as well as by keeping "its exchange rate below fundamentals for some time, though it is appreciating gradually."

Those policies are "very damaging to not just their commercial economic trading partners but also for the sustainable world trading system."

"That's why it's very important that we get China to move on, comprehensively, on that front, not just on the exchange rate but on subsidies and distortions," said the U.S. Treasury chief.

He argued that China was not the only one guilty of manipulating its currency, as other currencies tied to the dollar are also "still below fundamentals."

"Over time those currencies will have to rise very significantly further against major currencies -- the dollar, euro and the yen.

"It's not principally the dollar thing it's about those currencies against major currencies. It's because of the strength of growth, productivity growth.

"That's going to happen no matter what," he said, without giving a target figure for appreciation.

In December, U.S. Treasury said the renminbi, or yuan, had risen 7.5% against the dollar in the 18 months since Beijing began allowing a managed appreciation, and by 12% if China's high inflation rate is figured in.

Nevertheless, "it's got some ways to go," said the US Treasury chief.

Copyright Agence France-Presse, 2012

See Also:

Chinese State Media Slams Obama Over Yuan Remarks

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