America's Timothy Geithner warns China on yuan

By Andrew Walker
Economics correspondent, BBC World Service, Washington

  • Published
US Treasury Secretary Timothy Geithner. Photo: October 2010
Image caption,
Timothy Geithner made some very pointed comments without naming any countries

US Treasury Secretary Timothy Geithner has pressed China to let the value of the yuan rise against other currencies.

Speaking at IMF talks in Washington, Mr Geithner said nations relying too much on exports must change their policies, or global economic growth would slow.

He said major emerging economies should move towards "a more flexible, market-oriented currency policy".

In response, China blamed rich nations for problems in the currency markets that have hit many developing nations.

'Stark challenges'

The tension over between the US and China over currency policy surfaced once again at the International Monetary Fund (IMF) talks.

Mr Geithner renewed the pressure on China to allow its currency to rise. He named no names, but he was talking mainly about China.

The US has a long-standing grievance over China's currency policy, which limits the movement of the yuan against the dollar. The American complaint is that it gives Chinese exporters an unfair competitive advantage.

There was a vigorous response from Zhou Xiaochuan, governor of China's central bank (The People's Bank of China), who blamed the rich countries for problems in the currency markets.

Mr Zhou said extremely low interest rates in rich countries had created "stark challenges for emerging market countries".

Price bubbles



To invest in those markets, they need to buy the currency and that pushes its value up. That in turn makes those countries' goods more expensive for foreign buyers and the overseas investment money creates a danger of unsustainable bubbles in their property and financial markets.



That uneven global economic recovery is a problem that cannot be quickly fixed.

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