Geithner Says China Manipulates Its Currency

by Dave Keating | January 23, 2009 at 01:40 am

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Tim Geitner, who is currently in confirmation hearings to be Barack Obama's Treasury Secretary, signaled that the administration will take a confrontational approach to China's currency manipulation yesterday when he openly accused the Chinese of manipulating the Yuan. The Yuan fell today in response to the comments. China has indicated its displeasure it looks like it will keep its anger in check.

As Timothy F. Geithner moved closer yesterday to confirmation as Treasury secretary, he signaled a more confrontational approach toward China, bluntly stating that the new administration thinks Beijing is "manipulating" its currency and it will act "aggressively" using "all the diplomatic avenues" to change China's currency practices.

China's control of the value of its currency, the yuan, has been a friction point for years, with some economists saying Beijing has kept its currency artificially low to keep the prices of its goods cheap and generate trade surpluses. That has led to a global capital imbalance, as American consumers borrowed and spent and China became the United States' largest foreign creditor.