Visit of China''s Pres. to Washington comes at important transition of world economy

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Visit of China''s Pres. to Washington comes at important transition of world economy - Geithner

Economics 1/12/2011 10:27:00 PM



WASHINGTON, Jan 12 (KUNA) -- US Secretary of Treasury Timothy Geithner affirmed here Wednesday that the visit of China's President Hu Jintao to Washington, on January 19, comes at a time of "important transition for the world economy, the Chinese economy, and the US economy." Speaking at the Johns Hopkins School of Advanced International Studies, where he discussed US economic relationship with China, Geithner said that China "presents enormous economic opportunities for the United States and for the world," but that its "size, the speed of its ascent and its policies are a growing source of concern in the United States and in many other countries." He stressed that the US priorities in its economic relationship with China "from its exchange rate to its treatment of intellectual property - reflect changes that are fundamentally in China's interest." "Ultimately, China will need to make these changes in order to promote its own long-term ****perity," he noted, adding that China "needs the United States, but the United States also benefits very substantially from our rapidly expanding economic relationship with China." According to Geithner, "in our economic relationship with China, we have focused on two principal objectives, where the first is to expand opportunities for US companies to export and sell to the Chinese market.
"Our second objective is to promote reforms that will reduce China's reliance on exports-led growth and encourages a shift to domestic consumption and investment," he indicated.
Geithner stressed "as part of this, China's exchange rate needs to strengthen in response to market forces." He said that China "still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country," and that these policies "have the effect of keeping the Chinese currency substantially undervalued." He added "they also impose substantial costs on other emerging economies that run more flexible exchanges rates, and as a result have experienced a substantial loss of competitiveness against China." Geithner pointed out "this is not a tenable policy for China or for the world economy." According to the US official, "if China does not allow the currency to appreciate more rapidly, it will run the risk of seeing domestic inflation accelerate and face greater risk of a damaging rise in asset prices, both of which will threaten future growth." "Sustaining an undervalued currency will undermine China's own efforts to rebalance growth toward domestic consumption and higher-value-added production, " he added.
"We believe it is in China's interest to allow the currency to appreciate more rapidly in response to market forces. And we believe China will do so because the alternative would be too costly - for China and for China's relations with the rest of the world," he remarked.
Geithner also stressed that as China "reduces the role of the state in the economy, reforms policies that discriminate against US companies, removes subsidies and preferences for domestic firms and technology, and allows its exchange rate to reflect market forces, then we will be able to make more progress on China's objectives".


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