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US says China not manipulating currency
(Agencies)
Updated: 2009-04-16 09:20

WASHINGTON  -- The US Treasury Department on Wednesday issued a formal report that concludes China is not manipulating its currency to gain a trade advantage.

US says China not manipulating currency
US President Barack Obama (R) speaks to Treasury Secretary Timothy Geithner at the G20 summit in London in this picture takne on April 2, 2009. [Agencies] more photos
In a semiannual report to the US Congress on currency practices of key trading partners, the Treasury said all were suffering from the current global economic downturn, but said none manipulate their currencies for trade advantage.

The report did not explicitly call on China to continue allowing the renminbi to appreciate against the dollar as past reports have, but said it "remains of the view that the yuan is undervalued.". It did not estimate the level at which the yuan should be trading.

The conclusion is a retreat from comments by US Treasury Secretary Timothy Geithner at his January confirmation hearing, during which he accused China of manipulating currency. He said the US would act "aggressively” to change China's currency practices.

Geithner offered several reasons for the determination on China. He noted that China's currency had appreciated 16.6 percent between the end of June 2008 and February 2009, and that Chinese officials reaffirmed in January their commitment to allow greater flexibility.

As the global financial crisis intensified and many emerging market currencies fell against the dollar, China's currency appreciated, Geithner said.

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He also noted statistics suggesting the pace of China's foreign exchange reserves slowed in the last quarter of 2008.

Finally, Geithner said China had enacted a stimulus package in response to the global recession, second in size only to the US. That should act as a spur to domestic demand that will help rebalance global growth.

Measures so far "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," Geithner said.

At a briefing, a senior Treasury official said the White House was consulted during preparation of the report. He said current global economic conditions were much bleaker now than has been the case for the past decade.

"The financial crisis has really changed the context. We're looking at a global recession," the official said.