US Ties Chinese Exports to Yuan
WASHINGTON -- Top Obama Administration officials this week are making repeated calls for China to relax its grip on its currency and foreign firms looking to do business there.
On Tuesday, Treasury Secretary Timothy Geithner this week vowed to tie US restrictions on high-tech exports to China to the value of China’s currency, which most observers claim is vastly undervalued.
Also, today US Commerce Secretary Gary Locke called on China to open its market to foreign firms in accordance with past promises.
The comments are coming just ahead of a major state visit by China President Hu Jintao. Next week, President Hu will make his first visit to the US since 2006. Trade and economic issues are on the agenda, according to most news reports.
"China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country," Geithner said. "These policies have the effect of keeping the Chinese currency substantially undervalued."
Geithner said progress on currency and other issues would be tied to China's greater access to US tech products and investment opportunities here. The Treasury Secretary said the US favors expanded opportunities for its companies to export and sell into China, coupled with a change in China's export-heavy policy. The latter is blamed for the flow of cheap goods into North America, which some analysts believe has robbed the US of its manufacturing base and economic stability.
Moreover, Geithner said China's tight control over the yuan has both negatively affected the US and increased the risk of inflation there. The yuan has increased just 3% against in the dollar since June, and many experts believe China's reluctance to allow the yuan to be traded on global currency exchanges has deflated its value by as much as 40%.
