Stanley's blog

Treasury Secretary-designate Timothy Geithner stated in his confirmation hearing that President Obama believed that China was manipulating its currency. This has been a consistent American view but hitherto no action has been taken against China. What significance is there in the statement?

Does it herald a tough line being taken which could lead to a declaration in spring (required under a 20 year trade law) that China is engaging in currency manipulation? Geithner stopped short of stating that the manipulation is intended to gain an unfair trade advantage, as is required by the law. Obama supported this latter position in the Senate last year.

Or does the statement have no significance, other than in relation to the hearing? It was pointed out subsequently, on behalf of the Administration, pointed out that Obama would use all available diplomatic means.

The assertion is popular with weakened US manufacturers and with the trade unions, but encourages the growth of protectionist sentiments, which are not in American interests.

Whatever the true position, this kind of public denunciation is not the way to influence Beijing and one would have expected Obama, given the sensitivity of the issue, not to have wanted the issue raised this way at this stage. China has, of course, vehemently denied that it manipulates its currency to gain a trade advantage and criticized Washington for encouraging protectionism.

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