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|Geithner told Congress that the Obama administration shared their frustrations over China’s policies [AFP]|
The United States has sharpened its criticism over China’s trade and currency policies, calling them roadblocks to US economic recovery.
Timothy Geithner, the treasury secretary, said on Thursday that world powers should demand reforms from Beijing, and he pledged to rally world leaders to push China towards allowing the yuan to strengthen faster.
Geithner made the pledge during testimony before two US congressional panels in Washington, DC.
But he also urged caution over any measures that might further strain US-China relations.
“This process of adjustment in their exchange rate is going to have to happen over time,” he said. “We are using every approach we can find.”
Legislators from the House of Representatives Ways and Means Committee and the Senate Banking Committee were demanding a harsher tone towards China from the administration of Barack Obama, the US president.
Geithner said that the undervaluing of China’s currency and other policies has caused a huge trade gap between the two countries and is costing Americans millions of jobs.
He added that it is time for China to lift trade barriers against US exports and he called on Beijing to move faster to revalue a yuan said to be kept artificially low.
“China certainly is not playing by the rules according ot the World Trade Organisation,” Marshall Auerback, a senior fellow at the Roosevelt Institute, told Al Jazeera.
“It is not being fair in regard to its Asian competitors. China is in fact exerting a profound deflationary impact on the world economy by refusing to devalue its currency,” Auerback said.
‘Focus of attention’
Geithner said that the administration would work with Congress on an effective strategy, and push for assistance at a G20 meeting in Seoul, the South Korean capital, in November to mobilise trading and strengthen the yuan.
“We expect there to be a significant focus of attention … on China’s exchange rate policy [at the G20 meeting],” Geithner told the Senate Banking Committee.
“It’s about the broad interests of all of China’s trading partners in a level playing field.”
China has warned the US against trying to push it into reforms.
Pressure over the yuan exchange rate “not only would fail to solve the problems. On the contrary, it could have the opposite effect”, China’s foreign ministry said.
Legislators made clear they wanted Geithner to call China a currency manipulator.
Richard Shelby, the Senate Banking Committee’s most senior Republican, said: “There is no question that China manipulates its currency in order to subsidise its exports.
“The only question is: Why is the administration protecting China by refusing to designate it as a currency manipulator?”
No systematic risk
Legislators have said that the sole use of diplomatic efforts by the Obama administration to rectify the situation have so far been ineffective.
“We share your frustration,” Geithner said in the first of two Capitol Hill appearances.
However, he said that there was no systematic risk to China’s exchange rate policy.
Geithner’s move to take the issue to the G20 could be an attempt to stall any legislation being passed before November 2 congressional elections.
As such, the Obama administration may be trying to show that it is keeping to a promise to use all means at its disposal to reinvigorate the economy.
“Congress might push a bill but my sense is this is largely rhetoric and political posturing designed primarily for a domestic audience,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said.