April 17, 2009
U.S. Treasury Secretary Timothy Geithner on Wednesday refrained from accusing China of illegally manipulating its currency - much to the annoyance of textile trade groups who argue an artificially weak yuan disadvantages U.S. manufacturers.
In its semi-annual "Report to Congress on International Economic and Exchange Rate Policies," the treasury said, "China has taken steps to enhance exchange rate flexibility," although it conceded that the yuan is undervalued.
The National Council of Textile Organizations (NCTO), however, said it was disappointed the administration did not label China as a currency manipulator.
NCTO chairman Andy Warlick noted, "The model which allows China to produce enormous trade surpluses to achieve economic growth is a significant factor behind the global economic and financial crisis we now find ourselves in. This is the same model that has contributed significantly to the loss of one-quarter of all manufacturing jobs in the United States during the last eight years. And it is a primary reason that the United States is now the world's largest debtor nation and is now in peril of losing its economic sovereignty."
The treasury report notes that China's foreign exchange reserve accumulation slowed in the fourth quarter of last year and that the country's large fiscal stimulus package should help spur domestic demand growth and rebalance the Chinese economy. These steps should be just a beginning to a series of policy steps to rebalance the Chinese economy so that economic growth is more dependent on domestic demand, particularly private consumption.
Reprinted in part from just-style.com