BEIJING (CNN) -- U.S. Treasury Secretary Timothy Geithner met China's Vice-Premier Wang Qishan on Sunday and "exchanged views" about economic relations between their countries, both sides said.
The meeting came shortly after Geithner publicly hammered China over its currency, which Washington says Beijing keeps at artificially low levels to boost exports.
Geithner had urged the world's leading finance ministers to take strong action to ensure emerging markets nations allow their currency to rise in value in line with the free market.
The worry is that if such currency manipulation continues, it could wreak havoc on international trade.
Of course China is not going to let its currency value rise anytime soon. Not only that this would decrease their net export in the short run, but they would also made a huge loss. I remember reading an earlier blog post about how China was able to keep their currency value low by buying in US dollar. If the Chinese has to rise the value of the renminbi , that means they would have to decrease their US dollar reserve, which in turn might decrease US dollar value. The exchange rate between renminbi and US dollar would change significantly, causing a big loss from the loan China gave out to the US earlier.
ReplyDeleteIn the end, less currency manipulation from China sure can help improving the international trade, but unless the US make some significant improvement with its economy, the Chinese won't let loose of their currency that easily.
I agree that it is not in China's interest to appreciate the renminbi. Based upon U.S. foreign policy with China since the 70's, which has been largely consistent, I think that U.S. policymakers understand that, and have an understanding with the Chinese government in which political posturing is tolerated from both sides, but little progress is made.
ReplyDelete