Yuan appreciation consequential: Geithner
"China`s yuan has allowed the exchange rate to appreciate against the dollar by about 13 per cent in real terms over the last 20-22 months or so, more than 40 per cent in real terms over the last five years or so. That`s very consequential," he told reporters after an economic dialogue with Chinese Trade Minister Chen Deming.
"They acted just recently to widen the band to allow the exchange rate to move in response to market forces. They`ve significantly reduced the amount of intervention in the exchange markets. Their external surplus, their trading current account imbalances have come down very substantially," he said.
China continued to move progressively to relax the controls on capital movements and encourage greater convertibility, greater international use of the yuan, Geithner said, adding that "if you want to look at the full scope of those changes to see the extent and the consequence of the Chinese commitment to reform in that context."
Deming denied the yuan was undervalued and pointed to China`s shrinking global trade surplus. China reported a USD 5.3 billion surplus in March, down from a monthly level of at least USD 15 billion for most of 2011. "Given that China`s global trade is basically balanced while running a surplus with the US shows that the exchange rate plays a minimal role in trade," the Chinese Minister said.
The yuan has gained more than 13 per cent over the past two years since China announced an acceleration of exchange rate reform. With the yuan standing at around 6.3 against the dollar, Chinese authorities said earlier that the yuan had approached a relatively fair value.
Deming asked Washington to ease export controls on more than 2,400 high-tech products. The US restricts sales of such "dual-use" goods with possible military applications. The current trade imbalance between the two countries had mainly been caused by US restrictions on these products being exported to China, official China-org.cn website quoted him as saying.
Chen said it would be difficult for the two countries to achieve balanced trade if the US continued to maintain control over such a large variety of exported goods. Chen urged the US to stick to its pledges and take timely action in relaxing its export controls.
"Currently, the fact is that the US has not only failed to relax export restrictions, but has instead tightened them in some areas. For instance, the US is now mulling loosening controls on exports of commercial satellites, but it has also stressed that the controls will not be eased for China," Chen said.