Skip to comments.US says China ‘manipulating’ renminbi
Posted on 01/22/2009 11:46:58 PM PST by bruinbirdman
Tim Geithner, President Barack Obamas choice for Treasury secretary, on Thursday accused China of manipulating its currency and pledged aggressive diplomatic action to drive Beijing into action.
The comment a politically loaded term likely to raise tensions with Beijing marked the Obama administrations first public intervention in what will be one of its most critical international economic relationships.
The US has long felt that China has artificially depressed the value of its currency to boost exports to the detriment of US business but the Bush administration always stopped short of formally declaring China a currency manipulator.
In a written response to questions from senators, Mr Geithner, whose nomination was supported on Thursday by a clear majority of the Senates finance committee, said: President Obama backed by the conclusions of a broad range of economists believes that China is manipulating its currency. Mr Obama would use aggressively all the diplomatic avenues open to him to seek change in Chinas currency practices, he said.
The price of long-term US Treasury bonds fell after Mr Geithners remarks, with some traders concerned that Beijing might ease up its purchase of US assets. China is the largest foreign holder of US Treasuries after Japan, and more than half of the $5,500bn Treasury market is held by foreign investors.
Mr Geithner stopped short of pledging that the US Treasury would formally name China as an exchange rate manipulator in its annual currency report, due in the spring. The question is how and when to broach the subject in order to do more good than harm, he said.
Hank Paulson, Mr Geithners predecessor, repeatedly criticised Beijing for holding down its currency but resisted pressure from Congress formally to name China as a manipulator. US legislation requires only that the administration starts negotiations with any country it so designates.
China abandoned a fixed currency peg with the US dollar in 2005 for a managed float and since then the renminbi has appreciated by about 20 per cent against the dollar.
In November the Chinese authorities let the currency depreciate modestly, prompting speculation about a shift in policy. Since then, the renminbi has traded in a narrow band against the dollar, leading some economists to argue that a de facto peg has been restored.
In spite of the gradual appreciation in the renminbi, China has continued to record large current account surpluses, which are likely to become politically controversial in a global recession.
Mr Geithners statement will spark controversy in China. In an article published in the Chinese media last week, Zhang Jianhua, head of the central banks research bureau, said that wrong economic policies and improper market monitoring [in the US] are the primary reasons for the current financial crisis. He added: Any attempts to shift the responsibility to other countries reflect an inability to develop the right attitude for seeking solutions.
China better buy more of our debt or we’ll stop buying their cheap crap at wal-mart.
Well, it hasn't worked for the last 6 mos. ChiCom exports to U.S.A. down about 20%.
"China abandoned a fixed currency peg with the US dollar in 2005 for a managed float and since then the renminbi has appreciated by about 20 per cent against the dollar. "
Down 20% against the greenback. So, the yawn floats. Against what? The currency it is pegged to, the almighty buck.
The ChiComs claim the yawn floats against a basket of currencies. Right, they say they aren't in a recession, too.
I’ve always thought the solution to this problem would be simply to match manipulation with manipulation, i.e., sell dollars and buy renminbi in the open market. The Chinese would either have to give up their peg, or lose tons of money.
Diplomacy with China is unlikely to accomplish anything. The U.S. has never gotten a single thing it wanted out of China by diplomacy.
OK, so aggressive is the word of the week for Obambi’s folks. First it was “aggressive peace” in the ME. Now it’s “aggressive diplomacy”. What are they watching, the Sesame street guide to governing? Does that mean our pretty pleases come with a trillion dollars on top?
USA! USA! USA!
(you’re totally right)
China has been growing at anywhere from 10-20% per annum for almost 2 decades... but the growth is almost exclusively benefitting the urban areas, and leaving the rural areasa behind. Today, average salaries can be up to TEN times higher in urban areas... and the already congested cities (China has 50 metro areas that are larger than Chicago) keep facing a huge influx of farmers looking for ANY work they can get. If inflation gets a foothold, then food and other basics will be too expensive for the rural populations... while their urban counterparts are buying BMWs. That's a perfect recipe for wide-spread and massive riots (rather than the small daily demonstrations China faces today in the western half of the country).
The CCP fears a uprising by a mere 0.5% of their population far more than it fears American's government or military. (0.5% would be like the state of New Hampshire compared to all of America.) That 0.5% would be a body of 6.5 million. China's entire military has only 3 million people, including support staff. The CCP's tenuous hold would be in REAL danger in the face of that kind of rebellion... and again, that's only 0.5%. Nothing says that there wouldn't be a mass dissatisfaction among 3%... or 6%... of the population.
Can you imagine how our government would behave if they were in real fear of any group as large as New Hampshire?
"I tell'ya Frenchie, the Chicoms are playing us for suckers. Chumps."
"Why Mr. Geithner, you speak Chinese, you love the Chicoms, you belong to the GROUP OF 30 along with the communist President of China, and Volker. How could you say such things? Why even Hank Paulson has been to China a hundred or more times. The Chinese communists, American killing, Chinese killing, thieving, lying, now corporate/fascists are our friends"
"Frenchie, do you really think I'm going to do anything? Really? Now come on and lets party with the Nazi Colonel and his SS friends."
Down 20% against the greenbackAm I missing something?
Doesn't look like it's changed at all.