U.S. Complaints about the Rise of the Yuan

The United States Secretary of the Treasury, Timothy Geithner, expressed dissatisfaction about the value of China’s currency (the yuan) at the congressional hearing, saying that “the pace of appreciation has been too slow and the extent of appreciation too limited.”

The Chinese government reported in June that they would change the relation of the yuan to the dollar and “increase the elasticity.” Close to three months have passed since then; however, the percent of appreciation of the yuan against the dollar is remaining at less than 2 percent.

With midterm elections in November, the voices that blame America’s sluggish business condition and employment on China’s policy are growing stronger in the U.S. Congress. The congressional hearing — which opened soon after the summer recess — regarding the United States’ economic relationship with China told of the attitude within the Congress.

Secretary Geithner indicated a harsher-than-usual viewpoint regarding the yuan, which was based on the dissatisfaction of Congress. Geithner stated that American exports have decreased 8 percent this year, compared to the same period in 2008, while Chinese exports increased by 16 percent, but he also pointed out the benefits brought by economic connection with China. [His words] were probably aimed at controlling the movement within Congress regarding pushing for sanctions against China.

Along with the depreciation of the dollar, the yuan has depreciated against the yen, because China has not approved of a drastic appreciation of the yuan versus the dollar. South Korea also suppressed the excessive appreciation of the won through intervention by selling won/buying dollars, and the yen increased as a result. The problem of the yuan exists at the foundation of Japan’s bold intervention of selling yen.

Congress and Europe are voicing criticism regarding Japan’s [currency] intervention; however, those in the American Treasury and the Federal Reserve Board, including Geithner, have remained silent. The United States seems to be welcoming the decrease in interest rates, which will result in Japan’s purchase of American debts, but the main focus [of the U.S.] is the yuan, not the yen.

Secretary Geithner indicated that he intends to make the “correction of China’s [currency] imbalance”* a main topic of discussion at the G-20 summit hosted in Seoul this November. There seems to be hope that China, which strongly opposes unilateral pressure, will show flexibility in interactions more readily if there is a multilateral framework.

Developing countries in Central and South America, such as Brazil, which have been complaining about the currency-depreciation policies of various Asian countries, beginning with South Korea, are increasing their opposition to Japan’s [currency] intervention. The friction surrounding the yuan is at last taking on an international aspect.

*Editor’s Note: This quote, accurately translated, could not be verified.