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Currency may take back seat in US talks

By Li Xiaokun and Si Tingting (China Daily)
Updated: 2009-05-15 07:40

Despite mounting Congressional pressure, US Treasury Secretary Timothy Geithner might play down the currency issue during his upcoming visit to China as he seeks help to fight the financial crisis, experts said.

Geithner will make his first official visit June 1-2 as the two economic powerhouses prepare for the new China-US Strategic and Economic Dialogue scheduled for this summer in Washington.

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The visit comes days after US lawmakers proposed anti-dumping and countervailing duties to retaliate against countries, including China, that allegedly depress the value of their currencies to boost exports.

"The Chinese government has never engaged in so-called manipulation of currency exchange rates to obtain international trade benefits," Foreign Ministry spokesman Ma Zhaoxu told a regular news conference yesterday.

Under mounting domestic pressure, many Western media bet Geithner might press China again on the currency issue during his visit.

But he is unlikely to take a tough position, as the US needs China to buy more US treasuries to help bail it out of the recession, said Ding Yifan, deputy director of the Institute of World Development, Development Research Center of the State Council.

The US Treasury may have to issue as much as $3 trillion in new debt in the next couple of years.

"Actually, the appreciation of the renminbi won't do the US any good," Ding said. Many economists believe a stronger yuan would contribute to Chinese deflation and slower growth, which would mean a deeper world recession.

The US trade deficit with China widened to a record $266.3 billion in 2008.

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Personal Comment . :

The rise in the Renmenbi would have the double effect of putting pressure on Chinese exports and most of all for the US it would DEFLATE the value of it's debt towards China . It sounds like a very bad deal for China and a win win situation for the US .

On the other hand the US being the main consumer market China could hope to maintain part of it's best export market in relive health by helping the US improve the state of it's economy .

It seems to me the US has a lot more to gain by deflating the dollar towards China's yuan the China has to gain it will be a hard bagain between both of them over the next couple of years and i believe China's holding the higher ground being the creditor .

Geitner is facing a hard sell trying to get more money from China ,those talks will be critical for the world economy and both parties are very aware of it being somekind of siamese kins . After Clinton and Geitner it might come down to the president to eventualy meet with Hu Jintao in order to force China into more lending .

Tectol