China Comes Back at us Currency Exchange

As mentioned in my former posting here, China seems to have taken exception to how President Obama’s nominee for Secretary of Treasury, Timothy Geithner has hinted how China may be manipulating the yuan to make its goods cheaper for U.S. consumers and American products more expensive in China, thus adding to the present trade imbalance.

China has come back with there own comments and feelings regarding Mr. Geithner statement in an article published in the Washington Post.  Here are some of the excerpts from this article.

China Slams Geithner’s Comments on Currency

By Maureen Fan
Washington Post Foreign Service
Saturday, January 24, 2009; 12:57 PM

BEIJING, Jan. 24 — A top official at China’s central bank hit back Saturday at comments by U.S. Treasury Secretary-designate Timothy Geithner, who said the Obama administration believes that China is manipulating its currency.

Su Ning, vice governor of the People’s Bank of China, called Geithner’s remarks misleading and “out of keeping with the facts,” and said they could sidetrack efforts to manage the global financial crisis, the official New China News Agency reported.

The exchange underscored both a tougher stance by the Obama administration on China’s trade policies and China’s concern that protectionism in the United States could be on the rise. It also serves as a reminder of how the financial crisis has complicated diplomatic relations between the two countries.

Some economists argue that China has kept its currency, the yuan, also known as the renminbi, artificially low to keep domestic prices down and create trade surpluses. That led to an imbalance, as Americans over-borrowed and became indebted to their largest foreign creditor: China.

China says its price advantages are the result of the low cost of labor, land and other resources. With exports and imports plunging, China is worried about the impact of the global downturn on unemployment and instability and an aggressive U.S. trade policy will only worsen the situation.

“The currency rate has already appreciated in recent years. The recent depreciation is small and temporary,” said Song Hong, a research fellow at the Chinese Academy of Social Sciences. Song said the trade imbalance was caused not by manipulation but because China imports so many semi-manufactured goods from elsewhere in Asia, processes them and then exports them again.

Update 20 Feb 09:

U.S.-China Trade Ties Erode Amid Accusations
from Wash Post – World News by Ariana Eunjung Cha
BEIJING — The global financial crisis is bringing out the worst in the trade relationship between the United States and China.


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