The Joplin Globe, Joplin, MO

Business

May 3, 2012

US presses China over currency in economy talks

BEIJING — U.S. Treasury Secretary Timothy Geithner urged Beijing to let its tightly controlled currency strengthen and open its markets wider amid trade strains at a high-level economic dialogue Thursday.

Chinese officials denied the yuan is undervalued and pressed Washington to ease controls on exports of high-tech goods.

Beijing has allowed the yuan to rise gradually but Washington and other trading partners complain it still is too weak, giving Chinese exporters an unfair advantage and hurting foreign competitors. Some American lawmakers are calling for punitive tariffs on Chinese goods if Beijing fails to act faster.

This week’s talks, overshadowed by a diplomatic tussle over a blind Chinese legal activist, come as a weak global economy and pressure on governments of developed countries to generate jobs are fueling trade complaints against China.

Washington considers the promise of a stronger yuan in China’s latest five-year economic development plan “particularly important,” Geithner said.

In more pointed language last week, Geithner complained an undervalued yuan was a source of “unfair competition.” He called for a “stronger, more market-determined” exchange rate and said that would help the global economy.

Trade Minister Chen Deming denied the yuan was undervalued and pointed to China’s shrinking global trade surplus. China reported a $5.3 billion surplus in March, down from a monthly level of at least $15 billion for most of 2011.

“Given that China’s global trade is basically balanced while running a surplus with the United States shows the exchange rate plays a minimal role in trade,” Chen told reporters.

The annual talks are aimed at heading off trade clashes between the world’s two biggest economies and promoting cooperation on a wide array of environmental, financial and other issues. This year’s round includes U.S. Federal Reserve chairman Ben Bernanke, his Chinese counterpart Zhou Xiaochuan, and top trade, energy and finance officials from both sides.

The Chinese envoy, Vice Premier Wang Qishan, stressed the importance of cooperation to support global growth.

“The global economic recovery remains sluggish and the situation is grim and complicated,” Wang said.

Washington welcomed Beijing’s move in April to widen the daily trading band within which the yuan is allowed to fluctuate from 0.5 percent to 1 percent but thinks it failed to go far enough to create a market-driven exchange rate, according to a senior administration official with Geithner’s delegation.

U.S. officials pressed China to lower import barriers and create a more “level playing field” for foreign companies, said the official, who briefed reporters about the talks on condition of anonymity.

The United States reported its trade deficit with China reached an all-time high of $295.5 billion last year, up 8.2 percent from 2010’s previous record.

The U.S. Commerce Department announced last month it would impose new import fees on Chinese-made solar panels after concluding manufacturers received improper subsidies. Chinese authorities announced their own probe in November into whether U.S. support for renewable energy companies hurts foreign suppliers.

Chen, the trade minister, renewed demands for Washington to ease export controls on more than 2,400 high-tech products. The United States restricts sales of such “dual-use” goods with possible military applications.

The U.S. official said talks on that were continuing.

“I hope I will have enough patience and that this day of easing export controls will not be far off,” Chen said.

Geithner expressed support for China’s plan to overhaul its financial system to increase support for private enterprise and reduce special treatment for state-owned companies. He said that reflects Beijing’s recognition that it needs more on private sector innovation and has to allow more competition from foreign companies.

“The United States has a strong interest in the success of these reforms,” he said.

In his speech last month in San Francisco, Geithner complained Beijing’s support for state industry with low-cost loans, land and resources “hurts U.S. companies and workers who compete with these firms.”

 

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