Editorials

Geithner's dash on yuan

(China Daily)
Updated: 2010-04-09 07:53

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Editor's note: Mr. Geithner must understand two points to ensure his visit's success. First, China has to solve domestic economic problems. Second, the US has lots to do before asking China to have a speedy currency policy change.

If you think United States Treasury Secretary Timothy Geithner's impromptu visit to Beijing will give a clear picture of where the renminbi rate will go, think again. It only adds to the unpredictability of China's currency.

Few are expecting that his visit will produce any immediate breakthroughs on China's currency policy. On the other hand, as economic relations between the two countries mend following Washington's step back from naming China as a currency manipulator, Geithner's visit does offer hope that the two sides might be reaching a common understanding on China's currency policy.

Due to domestic concerns over the impact of a hasty appreciation on both the trade sector and the overall economy, the Chinese government has insisted on keeping the renminbi stable at a balanced and reasonable level.

A key message for the US treasury secretary is that if China is to change its currency policy, these domestic problems must be properly addressed first.

In other words, the pace of domestic adjustment will largely determine whether China will let the renminbi appreciate and how fast it does so.

The recent easing in Sino-US economic ties also indicates that the US government has recognized how unproductive it was in politicizing the exchange rate issue.

Hence, another message for Geithner is that if the US wants to see a speedy change in China's currency policy, it actually has a lot to do before blaming the renminbi for all of its economic woes once more.

A rapid appreciation of the Chinese currency will not only cause a loss in the value of China's foreign exchange reserves but also incur undesirable fluctuations in the global commodities markets.

One obvious way to minimize, if not avoid, such consequences will require the US to open its door wider for Chinese importers and investors.

Can Geithner take that message home quickly?

(China Daily 04/09/2010 page8)