Developing Economies

Is China Manipulating Its Currency? Don't Ask Tim Geithner.

There was supposed to be big drama this month over whether Tim Geithner would call China a currency manipulator. Don't hold your breath.

Geithner was supposed to deliver his verdict in a regular report to Congress due April 15. But in a statement Saturday, he said he would "delay publication of the report."

We hashed out the whole is-China-manipulating-its-currency thing on a podcast a few weeks back. The basic argument is that China is keeping its currency artificially cheap in order to make its exports cheaper on the world market.

The U.S. almost never calls anyone a currency manipulator, and slapping that label on China would create a lot of political tension. But some Congressmen, who point out that China's currency policies also make U.S. exports more expensive in China, are pushing for tougher action.

Saturday's statement suggests Geithner didn't want to come right out and say China is manipulating its currency, but he also didn't want to come right out and say China is not manipulating its currency. So he won't say one way or the other. Instead, he pointed to some high-level meetings planned for the next few months as "the best avenue for advancing U.S. interests."

Geithner also basically said China should let its currency appreciate — which is sort of a funny thing to bundle into a statement announcing that you're not going to say whether China is manipulating its currency. Here's the key bit from the statement about China's currency:

China's continued maintenance of a currency peg has required increasingly large volumes of currency intervention. Additionally, China's inflexible exchange rate has made it difficult for other emerging market economies to let their currencies appreciate. A move by China to a more market-oriented exchange rate will make an essential contribution to global rebalancing.

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