Geithner Urges China to Accelerate Economic Reforms

Posted May 3rd, 2012 at 6:10 am (UTC-5)
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U.S. Treasury Secretary Timothy Geithner on Thursday urged China to let the value of its tightly-controlled currency rise, as top diplomats from both countries gathered in Beijing for annual talks on economic and security issues.

Geithner's comments came at the start of the two-day U.S.-China Strategic Dialogue, which has been overshadowed by a political drama over a blind Chinese activist seeking U.S. protection.

The U.S. Treasury chief 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. But he said China should accelerate its economic reforms.

A senior U.S. official said Thursday that some progress has already been made in the economic talks. He told reporters on condition of anonymity that China has agreed to consider adopting international rules on providing credit to its exporters.

Export credits are just one of the many economic practices that have upset Washington. The U.S. also accuses China of intervening in currency markets to push down the value of the yuan. A lower value means Chinese-made goods are cheaper for foreign buyers, boosting China's exports.

Geithner acknowledged that China has allowed its yuan currency to gain about 13 percent against the U.S. dollar over the past two years. But he said more gains were in the long-term interest of both the U.S. and China.

Stephen Schwartz, chief economist for Asia at the Hong Kong-based Banco Bilbao Vizcaya, told VOA that most analysts still see room for further appreciation of the yuan, despite its recent progress against the dollar.

“The case for a substantial appreciation is getting harder to make because of the substantial, real effect of appreciation that occurred last year, as well as substantial narrowing of China's trade and current account balance in 2011. Yet we, and I think most, analysts still see some modest room for further appreciation – but less room than there was a year ago.”

Geithner's counterpart, Vice Premier Wang Qishan, defended China's monetary policy, saying Beijing is moving gradually to make its currency more flexible. He urged Washington not to “politicize” economic issues.

Wang also called on the U.S. to take steps to relax controls on high-tech exports, expand infrastructure cooperation, and increase financial market access.