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Washington accuses China of blocking economic reform
US Treasury Secretary Timothy Geithner accused China Thursday of blocking global economic reform. Geithner's comments come as an American lawmaker stated that Beijing undervalued the yuan to gain an unfair advantage in international trade.
AFP - China's refusal to revalue its currency is impeding global economic reforms, US Treasury Secretary Timothy Geithner said Thursday as Congress piled pressure on the government to retaliate.
"The distortions caused by China's exchange rate spread far beyond China's borders and are an impediment to the global rebalancing we need," Geithner told a congressional hearing on the US-China economic relationship.
"Reform of China's exchange rate is critically important to the United States and to the global economy," he said, facing charges from lawmakers that Beijing kept the yuan undervalued against the US dollar for a trade advantage.
Under election-year pressure, American lawmakers from both sides of the political aisle want to launch legislative action in two weeks to punish China over its currency policy which they say has robbed US jobs and fueled a ballooning trade deficit.
"America can no longer afford to be complacent. We no longer have the luxury of pursuing failed approaches. We must rethink the US-China economic relationship. We must act, not just talk," said Democratic Senator Max Baucus, who chaired the hearing.
He and other lawmakers criticized Geithner for delaying a Treasury report to Congress due in April that could have labeled China a currency manipulator.
Geithner had indefinitely postponed the release of the mandatory report in a bid to use both bilateral and international fora to pressure China to revalue the yuan. Beijing has not budged.
Chinese President Hu Jintao said last month that his country would adjust its policy at its own pace while emphasizing that Beijing was committed to the exchange rate reform.
"The time is long past for the Treasury Department to admit publicly what everyone else already knows -- namely, that China is manipulating the value of its currency in order to gain an unfair advantage in international trade," said Republican Senator Chuck Grassley.
"I worry that, by delaying the report, Treasury has raised expectations that won't be met."
Geithner signaled that Washington had not lost hope for action by China, citing the upcoming summit of the Group of 20 in Toronto on June 26-27 to be attended by China, the United States as well other key economies.
"We want to make sure that we are using every effective means to encourage them to move, including taking advantage of the fact that the leaders of the G20 meet in Canada later this month; in fact, in just two weeks, I believe," he said.
The Treasury chief said China's trading partners were scrambling to maintain their competitiveness following China's refusal to allow the yuan to reflect the market rate.
Many emerging markets have intervened in foreign exchange markets in order to resist upward pressure on their exchange rate, he said.
"Intervention in the rest of emerging Asia outside China has been at record levels over the last nine months."
On Wednesday, US lawmakers expressed dismay over Obama's failure to push the Chinese leadership to act and said they would set the stage for adoption in two weeks of trade and other sanctions on China.
"We are going to move," said Democratic Senator Charles Schumer, who is spearheading the legislative action, adding, that it was time for lawmakers to "put up or shut up."
He blamed the undervalued yuan for millions of lost US jobs and thousands of closed manufacturing facilities as well as the widening US trade deficit with China -- from 84 billion dollars in 2000 to nearly 227 billion dollars in 2009.
On Thursday, latest US trade data showed the US deficit with China expanded by 14.3 percent to 19.3 billion dollars in April.
China made its currency a little flexible in 2005 following US pressure, but when the global financial crisis erupted in 2008, it repegged the yuan to around 6.8 yuan to the dollar.