By Ian Katz and Rebecca Christie - Oct 15, 2010 2:03 PM CT
U.S. Treasury Secretary Timothy F. Geithner, seen here, suggested yesterday that China’s policy of buying dollars to hold down the yuan is distorting the global currency system by forcing other emerging-market nations to intervene. Photographer: Jay Mallin/Bloomberg
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Oct. 15 (Bloomberg) -- Jamie Metzl, executive vice president of the Asia Society, talks with Bloomberg's Mark Crumpton and Julie Hyman about China's currency policy. (Source: Bloomberg)
The U.S. Treasury Department said it will delay a report on international currencies, including China’s, while citing progress in the acceleration of the yuan’s rise.
The report will be delayed until after meetings of the Group of 20 nations in the coming weeks, according to a statement from the Treasury today.
Treasury Secretary Timothy F. Geithner “recognized China’s actions since early September to accelerate the pace of currency appreciation, while noting it is important to sustain this course,” according to the statement.
Geithner has increased pressure on China to allow the yuan to strengthen, saying last week the nation is contributing to a “damaging dynamic” of countries keeping their currencies weak to spur exports. Record imports from China are fueling calls by U.S. lawmakers for action to protect American jobs as next month’s elections approach.
The yuan, also known as the renminbi, has risen about 2.8 percent since June 19, when China announced it would drop its peg to the dollar.
China’s strengthening of domestic demand and allowing the yuan rate to move higher “will make a significant, positive contribution to the global rebalancing effort,” according to the Treasury statement.
It said the G-20 meetings will “provide an opportunity to make additional progress on the important challenge of securing stronger and more balanced growth.”
Geithner will travel to Gyeongju, South Korea, next week to meet with G-20 finance ministers to discuss currencies, government stimulus efforts and other economic policies ahead of a leaders’ summit on Nov. 11-12 in Seoul.
Congress Report
The Treasury’s currency report was due to be sent to Congress today.
The yuan rose to the strongest level since 1993 on speculation American lawmakers will step up calls for faster appreciation after the U.S. yesterday said its trade deficit with China widened to a record $28 billion in August.
The People’s Bank of China set today’s reference rate for yuan trading at 6.6497 per dollar, as the currency completed a sixth weekly advance.
Geithner last week called for international cooperation to rebalance currency markets and warned that lopsided trade flows threaten to limit global growth.
‘Stronger Pressure’
“More and more countries face stronger pressure to lean against the market forces pushing up the value of their currencies,” Geithner said in an Oct. 6 speech in Washington. Currencies are “inherently a multilateral issue” that is “much easier to solve if countries come together.”
President Barack Obama’s administration also faces pressure from U.S. companies and lawmakers who say the yuan’s weakness makes Chinese goods cheaper in the U.S., putting American manufacturers at a competitive disadvantage. With unemployment near a 26-year high, disapproval of Obama’s handling of the economy is likely to contribute to Republican gains in the Nov. 2 elections, polls show.
“In the U.S. election campaign, China is a useful scapegoat,” said Jacob Funk Kirkegaard, a fellow at the Peterson Institute for International Economics.
In a report yesterday, U.S. steelmakers including Nucor Corp. and U.S. Steel Corp. said companies in China get unfair government subsidies that violate World Trade Organization rules. The House of Representatives on Sept. 29 passed a bill to let U.S. companies seek duties on Chinese products to compensate for a weak yuan.
U.S. Imports
U.S. imports from China climbed to a record $35.3 billion in August, pushing the trade shortfall with the Asian nation to $28 billion, the highest since comparable data began in 1992, according to a report yesterday from the Commerce Department.
“While the Chinese government is announcing record exports, Ohio workers are facing layoffs and our manufacturing facilities are shuttering,” Senator Sherrod Brown, a Democrat from Ohio, said yesterday in a statement. “China’s unfair manipulation of its currency allows its underpriced imports to undermine American-made products.”
The Treasury released its previous currency report in July after a three-month delay, which Geithner said was to allow discussion within the G-20, which includes the largest developed and emerging economies.
The July report said the yuan “remains undervalued” and pledged to monitor it closely over the next three months for signs that Asia’s fastest-growing market is living up to its commitments to help rebalance the global economy.
“There is a consensus that the renminbi is significantly undervalued,” Kirkegaard said. “Where there’s not consensus is whether or not that valuation and the associated trade imbalance between the U.S. and China is the root cause of all the problems in the global economy.”
Ian Katz in Washington at ikatz2@bloomberg.net Rebecca Christie in Washington at rchristie4@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.
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