US Treasury Secretary Timothy Geithner on Thursday said it was “past time” for China to lift barriers to US exports, as he faced angry lawmakers’ demands for sanctions against Beijing.
Geithner abandoned his previously restrained approach to bluntly warn China it must let the yuan rise in value against the dollar to end trade distortions.
Facing November elections shaped by voter anger at the sour economy, US lawmakers are weighing bills that would slap sanctions on Chinese goods, amid accusations that Beijing keeps its currency — and thereby its exports — artificially cheap.
“It is past time for China to move” Geithner said, listing currency and other trade distortions as “core objectives” with China.
The US Treasury has consistently avoided labeling China a currency manipulator in its semi-annual reports to Congress — a move which could set in motion a process for retaliation — but has maintained that the yuan is undervalued.
The issue appeared to have been defused in June when China pledged in June to let the yuan trade more freely against the dollar, but Geithner has reiterated that he is still not satisfied with Beijing’s moves to loosen its grip on the currency.
Despite the “important” pledge, Geithner said the Chinese currency’s value was “essentially” unchanged in the last two years.
“China has continued to intervene in the exchange markets on a very substantial scale to limit the upward pressure of market forces on the Chinese currency.”
Since then, it has appreciated about 1.6 percent against the greenback and traded at 6.7181, its highest level since June, on Wednesday.
China on Thursday warned outside pressure on Beijing to change its currency regime would be counterproductive.
“The appreciation of the renminbi cannot solve the US trade deficit against China and it cannot solve the US domestic unemployment issue,” foreign ministry spokeswoman Jiang Yu told reporters.
“The issues in China and US economic relations and trade should be properly solved through consultations on an equal footing. Exerting pressure cannot solve the issue. Rather, it may lead to the contrary.”
Despite his harsh warnings Geithner also tried to put the currency dispute in the context of a wider and mutually beneficial trade relationship with the fast-emerging economic super-power.
Boosting trade with China is seen as vital to President Barack Obama’s goal of doubling exports in five years.
“We have very significant economic interests in our relationship with China,” Geithner said.
The US exports to China have tallied more than 53 billion dollars since the beginning of this year.
But trade tensions with China were ratcheted up another notch on Wednesday when Washington called on the WTO to probe unfair Chinese trade practices.
The United States is accusing China of unfair treatment of US steel and electronic payment providers, the first step toward sanctions.