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Geithner remarks 'may reflect' policy shift

By Xin Zhiming (China Daily)
Updated: 2009-01-24 07:51

Remarks by US treasury secretary-elect Timothy Geithner that China is "manipulating" its currency suggest the Obama administration will take a firm stance on its economic policies toward Beijing, local analysts said on Friday.

Timothy Geithner

Geithner told senators on Thursday the new administration will press China to change its exchange rate policies. His comments were a clear move away from the stance of the Bush administration, which did not label China as a currency manipulator.

"The new US government seems to be harsher regarding China's exchange rate policy," Sun Lijian, an economist with Fudan University, said.

"More comments about China violating intellectual property rights and dumping charges on Chinese exporters will follow," he said.

Such statements, along with the accusation about currency manipulation, are designed to pressure China to do more to help the crisis-battered US economy, he said.

"The US is deep in recession," Ma Ming, an economist with the Beijing Institute of Technology, said. "It is in dire need of help from outside."

After building up a huge deficit with its costly market rescue plans, the US has become increasingly dependent on China and other economies with abundant liquidity to help finance the plans.

China became its largest treasury holder in September, and analysts have said the US now wants Beijing to increase its holdings to provide more liquidity to counter the deficit.

China's central bank said it had noted Geithner's remarks, media reported on Friday.

If China toes the US line (to let the yuan rise further), its exports will take another battering and its economy will worsen, analysts said.

That would in return be detrimental to the US and the world economy, Sun said.

China's economic growth fell to 6.8 percent in the final quarter of last year, the lowest since 2001.

The figures could fall again in the first quarter of this year, he said.