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China news tagged with: rmb (11)

• Treasury’s Geithner: Durable Economic Stability

  

  U.S. Treasury Secretary Timothy Geithner spoke to reporters on his way to Beijing on Saturday, the first day of his highly-anticipated first visit to China.  From MarketWatch:

  “We are seeing more durable stability in the economy and the financial system is substantially in better shape,” Geithner told reporters Saturday en route to Beijing, his first trip here since taking office in January. “But we have a ways to go, and we need to keep working in the U.S. and with other major economies to restore conditions for a sustainable recovery.”

  [...]“I will of course make it clear that we are committed to a strong dollar, that we are committed to bringing our fiscal deficits down over the medium-term to a sustainable place,” the Treasury chief told the Chinese press, according to a transcript Treasury first provided U.S.-based reporters on Saturday. “We believe in a strong dollar. A strong dollar is in the U.S. interest.”

  Geithner added in that briefing that the Federal Reserve is “completely committed to keep inflation low and stable over time.” The U.S. “will do anything we need to do to make sure that we bring down our fiscal deficits and improve the strength of the US economic fundamentals,” he said.

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  • May 31, 2009 3:27 PM

• All Eyes on U.S. Treasury Secretary Geithner’s First Trip to China (Updated)

  

  U.S. Treasury Secretary Timothy Geithner arrived in China this weekend, where he will meet Monday and Tuesday with some of China’s highest officials, including President Hu Jintao and Premier Wen Jiabao.  These are unusually high-level talks, according to Business Week:

  Geithner travels to China for the first time this weekend. He’s scheduled to visit with a string of Beijing leaders, including President Hu Jintao. As a reality check for the significance of this reception, imagine that Wang Quishan visited Washington next week. Wang, who as China’s vice premier is Geithner’s counterpart, would certainly see Geithner, and doubtlessly Larry Summers, head of President Barack Obama’s National Economic Council. But would he get a meeting with Vice President Joe Biden? How about Obama himself? Probably not. Yet in addition to Hu and Wang, Geithner is scheduled to meet with Chinese Premier Wen Jiaboa.

  The Chinese will have to explain why they are so interested in Geithner. But an interesting subtext is that it is Geithner who delivered the administration’s most stinging, high-level remark aimed at China. In his Senate confirmation hearing in January, Geithner said in reply to a written question that China is deliberately suppressing the value of the renminbi, the country’s currency. Geithner’s staff later said the reply was a mistake, yet it attracted much attention, and he had much explaining to do for weeks after – China is by far the largest international holder of U.S. debt, and may be relied on to finance much of Washington’s deficit for years to come.

  In contrast to his combative tone during his confirmation hearings, analysts expect that Geithner will not raise the issue of currency revaluation on this trip.  Instead, he will encourage China’s leadership to transition its export-led economy to one supported by domestic consumption.  From The Wall Street Journal:

  Treasury Secretary Timothy Geithner heads to Beijing this weekend to urge Chinese leaders to fundamentally alter the export-oriented economy that has created years of trans-Pacific trade tensions.

  [...]That means encouraging Beijing to offer more generous health-care, retirement, welfare, educational and other benefits in order to persuade the average Chinese citizen that spending now doesn’t mean starving later.

  [...]That will also require, in the U.S. view, allowing China’s currency to move more freely against the dollar. But Mr. Geithner is unlikely to hector Beijing about the yuan very much during this visit.

  Read more about the expected agenda for Geithner’s China talks on The Wall Street Journal’s China Journal blog.

  Greg Robb at MarketWatch reports in-depth on the political backdrop for Geithner’s visit – the complicated and often uncomfortable relationship between the world’s two largest economies in the current global recession:

  The theory went that with the U.S. consumer tapped out, China would focus on building up its own domestic consumer market. But experts say this hasn’t happened, at least to the extent required.

  Instead, Chinese exporters have doubled down on the return of the U.S. consumer and have increased their capacity. Exporters appear to have political muscle in China to block meaningful reform.

  At the same time, the U.S. budget deficit is projected to reach record levels for the next several years.

  “We’ve got to hope China still has an appetite for our debt,” given the “ocean of red ink” coming down the road, said [Timothy Adams, who also served in the Bush Treasury].

  See also the Telegraph for an editorial on the inevitable growing pains of restructuring the China-U.S. economic relationship.

  Update #1: This article from The China Post offers more in-depth analysis of the strength of Geithner’s bargaining position and the deal he intends to push:

  Though the crisis has given Geithner a weak hand, treasury officials said he will seek to push this bargain:

  The U.S. will work to reduce its budget deficits once the crisis ends, urge Americans to save more and shrink the trade deficits. To replace diminished U.S. spending, the Chinese will be asked to step up spending and stop saving so much. The administration says this can be done if Beijing improves pensions and health insurance so Chinese households don’t feel pressured to save so much.

  Geithner is expected to point out that U.S. consumers already are rebuilding their retirement savings. The Chinese have pledged to redirect their economy to boost domestic growth. But many private economists question how serious China is about it.

  Analysts said they expect Geithner and the Chinese to pledge to do all it takes to end the recession. Both sides know any hint of discord between the world’s largest and third-largest economies probably will unsettled [sic] financial markets.

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  • May 30, 2009 1:41 PM

• US Bill to Punish China Faces an Uncertain Future

  

  Growing U.S. dependence on China in such grave matters as pressuring North Korea to return to disarmament negotiations and stabilizing the world economy may make the Obama administration hesitant to confront America’s largest creditor over what some U.S. lawmakers believe to be an undervalued yuan.   From the Taipei Times:

  As the US economy slumps, lawmakers have renewed a push to punish China for what they see as currency manipulation that costs US jobs. Their prospects appear bleak at a time when the US is seeking Chinese help in confronting crises around the world.

  In the aftermath of North Korean nuclear and missile tests, the administration of US President Barack Obama wants China, a veto-holding permanent member of the UN Security Council, to use its leverage as North Korea’s only major ally to push Pyongyang to return to nuclear disarmament negotiations.

  [...]Another reason the Obama administration probably will oppose currency legislation is China’s role as the biggest holder of US government debt, Republican Representative Ed Royce said.

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  • May 30, 2009 11:48 AM

• Sign of Strength or Evidence of Weakness? China’s Dollar Reserves

  

  From the Council on Foreign Relations blog:

  At key points then, China shied away from the decisions that would have allowed it to avoid accumulating so many reserves. China’s leaders probably didn’t intend to accumulate $2 trillion in reserves, but they weren’t willing to make the policy choices needed to change China’s growth trajectory either.

  And now China has a problem. Its dependence on exports meant that it ended up importing unemployment from the rest of the world just when China’s own property boom soured. And it so happened that the costs of relying on exports for growth became obvious at the same time that the costs of accumulating more reserves than China needs also became very visible.

  China’s leaders likely hoped big investment gains would help offset their currency losses. Now, though, they realize that they bought equities and other risk assets at the top of the market, and thus added to their losses. China’s leaders have noted the criticism that has been directed at the CIC. They now that fessing up to additional losses won’t be popular.

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  • April 6, 2009 10:43 PM

• Ben Simpfendorfer: China’s Yuan Ambitions

  

  From the Wall Street Journal:

  China is playing a growing role in discussions over solutions to current economic problems. Much of the talk has focused on money — whether Premier Wen Jiabao’s concerns about the value of China’s U.S. treasury investments, or the People’s Bank of China’s paper floating the idea of a de-dollarized international monetary system. Up to now, one limit to China’s ability to contribute to global monetary reform has been its own currency policy, particularly the fact that the yuan is not convertible. However, now there are tentative signs that’s starting to change.

  Beijing has signed currency swap agreements with six central banks: Hong Kong, Indonesia, Korea, Malaysia, Belarus and most recently Argentina. These swaps permit those central banks to sell yuan to local importers in those countries who want to buy Chinese goods. This is particularly useful for importers struggling to obtain trade finance as a result of the financial crisis. As such, it’s consistent with China’s desire to participate in the Group of 20’s efforts to support trade financing.

  China has long wanted its currency to play a more important role in the global financial system. These swap arrangements come in the context of that broader policy aim. The broader policy goal also has a more practical function in reducing currency exposure and transaction costs for Chinese exporters. The rise in the yuan’s value relative to the dollar in early 2008 was a reason why some Chinese exporters went bankrupt. The ability to settle trade in yuan would reduce this risk in the future.

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  • April 5, 2009 11:32 PM

• China and the Dollar

  

  From the Wall Street Journal:

  As if the dollar didn’t have enough problems, Timothy Geithner took China’s bait yesterday and said he was “quite open” to its suggestion this week to displace the greenback with an “international reserve currency.” The dollar promptly fell and stocks followed, before the Treasury Secretary re-emerged to say “the dollar remains the world’s dominant reserve currency. I think that’s likely to continue for a long time.

  Mr. Geithner is learning on the job, and yesterday’s lesson is that it isn’t smart to fool with currency markets when you are already tempting fate with a gigantic U.S. reflation. Treasury and the Federal Reserve are flooding the world with dollars to break the recession, and the world is rightly getting nervous. The solution floated by Chinese central bank governor Zhou Xiaochuan — an increased role for the International Monetary Fund — isn’t desirable. But his warning about the dangers of dollar weakness and exchange-rate instability is still worth heeding.

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  • March 29, 2009 8:17 PM

• The World’s Most Expensive Club – The Economist

  

  From The Economist: China’s investment in Blackstone shows how government investors are flourishing at the heart of the financial system

  With $1.2 trillion in foreign-exchange reserves and the pool growing by more than $1 billion every day, China casts a giant’s shadow over the global financial markets, even if it has mostly used the money to pile up American Treasury bonds. The announcement on May 21st that it would invest $3 billion of its reserves in Blackstone, a New York-based private-equity firm soon to issue shares, shows that it is prepared to barge into murky private markets as well as liquid public ones. It is not the only inscrutable country to be cosying up to the inscrutable private-equity industry. Around the world, a secretive society is emerging of governments flush with foreign assets, some of them petrodollars, that are increasingly calling the shots in international finance. The Blackstone deal is likely to stir others to invest their money even farther away from prying eyes than they do already.

  Technorati Tags: Blackstone

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  • May 25, 2007 7:59 PM

• China aims to spend $200bn of reserves Ôºç Zhou Jiangong

  

  From Asia Times:
  
  

  The Chinese government is taking action to implement a new policy of diversifying the disposal of the country’s over US$1 trillion foreign exchange reserves which was initiated by the Central Conference on Financial Affairs three weeks ago.

  The Ministry of Finance (MOF) is planning to issue yuan-denominated bonds to raise funds that will be used to “buy out” as much as $200 billion from the country’s foreign reserve pool. To take funds out of the foreign exchange reserves the government must pay the equivalent amount in yuan to balance the books. [Full Text]

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  • February 3, 2007 10:41 PM

• Beijing heavy hitter takes aim at revaluation’s backers – John Garnaut

  

  From The Sydney Morning Herald:

  The newest member of the Chinese monetary policy committee will today launch a stinging attack on those calling for a major revaluation of the yuan.

  Fan Gang, a Harvard-educated economist who this month joined the People’s Bank of China committee responsible for advising on interest rates and exchange rate settings, says the US dollar, not the Chinese currency, is “a major source of instability”.

  “The current problem is not RMB [renminbi, or yuan] revaluation, but dollar devaluation,” he says. “This is the major cause of the current imbalance.” [Full Text]

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  • August 29, 2006 10:49 AM

• Internationalization of the RMB to be accelerated – Hu Zuliu

  

  From The People’s Daily:

  It is an indisputable fact that China has become the world’s major economic power. Based on market exchange rates, the size of China’s overall economy is already the world’s fourth largest, accounting for one sixth of the US economy and one second to two third of Japan’s economy. If calculated in accordance with the actual purchasing power of RMB, China has already become the world’s second largest economy. However, it is also undeniable that China’s currency monetary system does not match the scale of its economy. The internationalization of the RMB is an issue which has not been taken seriously enough and needs a quick resolution.

  The RMB is not an international currency. This is most apparent when considering how very little international trade was conducted in RMB (mainly in Hong Kong and neighboring countries in South Asia). Although the central bank recently approved IFC and the Asian Development Bank to issue bonds in Yuan, the volume of debt circulated in the valuation of the RMB in the international financial market is zero. The volume of RMB assets held by the world’s financial institutions ¬®C including the national debt carried by central banks ¬®C is also zero. All these are disproportionate to China’s status as an economic power.

  Technorati Tags: China, RMB

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  • July 4, 2006 10:46 AM

• Richard McGregor: Rumours on revaluation of renminbi increase

  

  From the Financial Times:

  China’s currency traded briefly outside its tightly controlled band on Friday, triggering a renewed wave of speculation that the government was preparing to allow a long-expected revaluation.

  The unexpected price move followed weeks of international pressure on China to allow the renminbi to appreciate. But the People’s Bank of China, the central bank, said it had made no decision to change its exchange rate policy.

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  • April 29, 2005 8:42 PM

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