Geithner's comments are a test

Timothy Geithner's recent remarks on China's exchange rate may have been a test.

On Jan 22, Geithner, awaiting confirmation of his appointment as the US Treasury Secretary, told senators that China was manipulating its currency. But on Feb 10, he softened his tone by saying that "we are going to make that judgement carefully".

His early statement immediately drew criticism from China's Ministry of Commerce and central bank. To calm the verbal dispute a White House official explained Geithner was only repeating what Barack Obama had said during the election campaign and it did not represent an official stance. On Jan 30 Chinese President Hu Jintao held a telephone talk with Obama. Both heads of state agreed on reciprocal visits as well as on holding a sideline meeting at the upcoming financial summit of the world's 20 largest economies in London this April.

The exchange rate has long been an issue in Sino-US relations. But Geithner's remarks came at a particularly sensitive time, with economies in both the United States and China weakening and tensions over trade rising around the globe.

Political observers said Geithner's two remarks are not made accidentally, but a tactical move to assess China's attitude. They also say it may be a move by the White House to pass through the Congress its personnel appointment.

While accusing China of manipulating the exchange rate, Geithner perhaps did not expect a strong reaction from the country, since the Chinese people were celebrating their traditional Spring Festival holidays. But China reacted strongly. The country's experts, scholars and media criticized Geithner, joining the forcible refutation by the Ministry of Commerce and central bank. Premier Wen Jiabao also made a response to the US statement on Jan 29 during his visit to Germany, saying the yuan's exchange rate is reasonable.

The market reacted strongly to Geithner's remarks. Soon after his statement foreign exchange holders dumped a large volume of US government bonds. Britain's The Times said Geithner's statement could harm Sino-US bilateral ties.

Zhang Zhixin, a scholar

www.sina.com.cn

(China Daily 02/16/2009 page2)