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China dismisses US currency accusation

(Xinhua/Chinadaily.com.cn)
Updated: 2009-01-24 17:00

China's central bank Saturday dismissed as "untrue and misleading" a recent allegation by US Treasury Secretary-designate Timothy Geithner that US President Obama believes China is manipulating its currency.

New York Federal Reserve Bank President Timothy Geithner, US President Barack Obama's nominee for Treasury Secretary, testifies in his confirmation hearing before the Senate Finance Committee on Capitol Hill in Washington, January 21, 2009. The People's Bank of China, the country's central bank, disproved Saturday the allegations by Geithner that China is manipulating the exchange rates of its currency, saying the statement is untrue and misleading. [Agencies]

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Su Ning, vice governor of the People's Bank of China, said that the allegation could sidetrack the effort to find the real cause of the financial crisis.

He warned against possible re-emergence of protectionism as the impact of the global financial and economic crisis spread.

"Also, we should avoid any excuse that might revitalize or fuel protectionism. Because it will do no good to the fight against the crisis, nor will it help the healthy and stable development of the global economy," Mr. Su said.

Mr. Geithner, who moved closer to confirmation as Treasury secretary on Thursday, made the comment in writing to the Senate Finance Committee.

"President Obama, backed by the conclusions of a broad range of economists , believes that China is manipulating its currency, " Mr. Geithner wrote.

Yi Xianrong, a researcher with the financial research center of the CASS, said on Friday if the U.S. labeled China as a "currency manipulator", it would hurt the concerted action of fighting the global financial crisis.

It would also hamper the global efforts to shake off an economic slowdown as the Sino-U.S. economic tie had become one of the world's most important bilateral economic ties, Yi said.

According to China customs statistics, Sino-U.S. trade hit US$333.74 billion last year, up 10.5 percent year on year.

With a 9-percent rate, China contributed more than 20 percent of global economic growth in 2008, while the U.S. remained the world's largest economy, Yi said.

Geithner's comment was just aiming to try out the Chinese government's response, said Zuo Xiaolei, senior analyst with the Beijing-based Galaxy Securities.

Yuan appreciation and the pace of appreciation should not only be decided by trade surplus but also the status of domestic economic development, Zuo said.

"The price advantage of Chinese exports may not be a result of currency issues, but the country's lower costs of labor, resources and land," she said.

In July 2005, China abandoned a decade-old peg to the U.S. dollar and allowed its currency to appreciate by 2.1 percent. Since then, the yuan has strengthened further, rising more than 20 percent against the U.S. dollar.