Geithner Says China Just Starting to Let Currency Appreciate
"Currency"08/04/2010
By Ian Katz and Rebecca Christie - Aug 4, 2010 5:10 PM CDT
Aug. 2 (Bloomberg) -- Sean Darby, chief Asian equity strategist at Nomura Holdings Inc. in Hong Kong, speaks with Bloomberg's Rishaad Salamat about China's stock market and economy. China’s manufacturing grew at the slowest pace in 17 months in July as the government clamped down on property speculation and investment in energy-intensive and polluting factories. Darby also discusses China's currency policy. (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner said China is just starting to let its currency appreciate and it’s too early to know how much Chinese officials will allow the yuan to rise.
“They’re only at the beginning of that process and what matters is how far and fast they let it move,” Geithner said today in response to a reporter’s question after a speech in Washington. “We, like everybody else, are watching that closely.”
China indicated on June 19 that it was scrapping the yuan’s 2-year-old peg to the dollar, a move that helped mute criticism from the U.S. and elsewhere that the world’s third-biggest economy was suppressing the value of its currency to gain a trade edge. The yuan has risen 0.8 percent against the dollar since the shift was announced.
“It’s worth remembering that when they last let the exchange rate move, in the period between ‘06 and ‘08, it moved 20 percent over a two-year period,” Geithner said. “It’s very hard to judge from the initial movement how far and how fast they’re going to let it go, but again what’s important to us and I think to all of China’s trading partners is they actually let it appreciate significantly in response to market forces.”
U.S. lawmakers including Senator Charles Schumer, a New York Democrat, have pressed the Obama administration to demand a speedier appreciation of the yuan. The House Ways and Means Committee scheduled a hearing for Sept. 15 to discuss whether China has made progress in allowing the currency to strengthen.
“The growth you’re seeing in China, the reforms you’re seeing in China, as they shift towards an economy more driven by domestic demand, are providing very substantial benefits to American workers and American businesses,” Geithner said.
The yuan today retreated from a three-week high and offshore currency forwards slipped on concern that demand for Chinese exports will slow amid signs the U.S. economic recovery is losing traction.