Geithner heads to China with forex demand | business | Hindustan Times
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Geithner heads to China with forex demand

business Updated: Oct 23, 2010 17:01 IST

US Treasury Secretary Timothy Geithner was to head to China on Sunday bearing a demand for emerging economies to let their currencies appreciate, following fractious G20 talks in South Korea.

Geithner will meet Vice Premier Wang Qishan in the coastal city of Qingdao, a senior US official said, according to Dow Jones Newswires.

At a news conference after the talks among G20 finance ministers in South Korea, Geithner said a "gradual appreciation" in the currencies of major trade-surplus nations was required.

Without naming China, he said such countries should move "away from export dependence and towards stronger domestic demand-led growth".

"If the world economy is going to be able to grow at a strong, sustainable rate in the future... then we need to work to achieve more balance in the pattern of global growth as we recover from the crisis," Geithner added.

The Treasury chief reaffirmed US support for a "strong dollar", denying any policy of benign neglect to weaken the currency and so boost US exports.

As the holder of the world's reserve currency, the United States recognised its "special responsibility" to forestall damaging volatility on foreign exchange markets, he said.

Many emerging markets are suspicious that the United States is deliberately allowing the dollar to flounder, damaging their own export competitiveness.

But for the United States, which is in the throes of election season, China's firm grip on the yuan's value is the root of the problem. Critics say that policy gives China's export machine an unfair edge.

"We all committed to refrain from competitive devaluation or undervaluation," Geithner said after the G20 talks.

He noted that the G20 had committed to avoid "excessive imbalances" in members' current account balances. Driven by its booming foreign trade, China's current account is well in surplus while the United States is deep in deficit.

The G20 was determined to "prevent them (imbalances) expanding again to levels that would threaten future growth and stability", Geithner said.

Acceding to a longstanding US demand, the G20 also agreed to empower the International Monetary Fund to exercise greater vigilance over its members' economies, to prevent spillovers from skewed patterns of trade.

"The IMF was created to play this role but its ability to do so in practice has been constrained by the reluctance of its members to expose themselves to a candid, independent, external assessment of the effects of their policies on the global economy," Geithner said in a veiled dig at China.