Friday, October 16, 2009

US Hardens Stance on China's Currency Rigidity

The Treasury toughened its language on China in its half-yearly report to Congress on exchange rate policies, reports Sarah O'Connor for FT.

The Obama administration said it had "serious concerns" about the rigidity of the renmimbi, but stopped short of accusing China of manipulating its currency.

Harassing China about buying dollars baffles me. Does the U.S. government realize that a flight from the dollar could occur at any time, and that Chinese propping up of the dollar is probably the only reason it hasn't occurred already?

Further, a large chunk of the dollars the Chinese have bought go into Treasury securities. Who is going to buy the Treasury securities about to be issued, if not the Chinese?

Instead of harassing the Chinese, Treasury Secretary Geithner should be sending weekly thank you cards to Chinese finance minister Xie Xuren.

1 comment:

  1. It's all bark, but no bite. Such rhetoric complements the "strong dollar" talk show, which probably makes a fairly acceptable PR for the clueless public.
    And who knows what is being done silently? There is always a silent component in such things. Perhaps China is quietly getting something China wants.
    In the spirit of this time, China can potentially get a whole lot for not calling their debts, and it wouldn't cost US anything extra. Things like military technology, may be not right now, but they have money, time and patience.

    A short list of things I would like as a gift card if I were a Chinese govt:
    1. ballistic missile submarine (SSBN) technology (power plant, quieting, etc)
    2. submarine-launched ballistic missile technology (motors, guidance)
    3. Pershing-2 warhead guidance system design and a sample
    4. 155mm neutron warhead design
    5. Modern jet engines technology, design and samples

    This list can go on and on. It's not unrealistic given the circumstances, and Chinese know it very well.