China currency stance ‘impeding reforms’, says Geithner

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Global economic reforms are being impeded by China’s refusal to revalue its currency, the yuan, US Treasury Secretary Timothy Geithner has said.

He told the US Senate Committee on Finance that distortions caused by China’s stance were “an impediment to the global rebalancing we need”.

The US has long complained that Beijing keeps the yuan undervalued against the US dollar to gain a trade advantage.

Some analysts argue the yuan is undervalued by as much as 40%.

‘Flexibility needed’

China pegged the value of the yuan to the US dollar in 2008 in order to keep its exporters competitive amid falling demand in the global recession.

Mr Geithner said that Beijing’s shackling of its currency, also known as the Renminbi (RMB), to the dollar was causing other Asian countries to intervene in foreign exchange markets at record levels.

“A more flexible RMB will allow market forces to play a more active role over time in facilitating strong, balanced and sustainable growth globally,” Mr Geithner said.

Last month, at high level trade talks with the US, China said it would seek “gradual progress” on reforming the exchange rate of the yuan, but set no timetable for doing so.

Courtesy of the BBC.

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