WASHINGTON – In a surprise announcement, Treasury Secretary Timothy Geithner said Saturday that he will delay for three months the much-anticipated decision on whether or not to brand China a currency manipulator.
Geithner was poised to make the announcement before an April 15 deadline that requires the agency to report to Congress annually about nations that artificially value their currency to the disadvantage of U.S. companies.
Democrats in Congress and even trade advocates have for weeks demanded that the Obama administration take action against China. They say the undervalued yuan hurts both U.S. exports to China and makes Chinese products unfairly cheap here.
“There are a series of very important high-level meetings over the next three months that will be critical to bringing about policies that will help create a stronger, more sustainable, and more balanced global economy,” Geithner said in a statement, promising to press China in three high-profile meetings. “I believe these meetings are the best avenue for advancing U.S. interests at this time.”
Geithner’s statement comes just two days after Beijing announced that Chinese President Hu Jintao will attend a nuclear security summit meeting in Washington April 12-13. Even as the United States seeks to curb China’s currency rate setting, it also needs China’s support for U.N.-backed sanctions against Iran and its nuclear ambitions, and Geithner’s announcement appeared to be timed before Hu’s arrival.
Saturday’s announcement by Geithner gives China a way to address U.S. concerns while saving face. It avoids a decision made under an embarrassing deadline.
China repeatedly has denied its exchange rate is fixed to the disadvantage of foreign competitors. But economists in the United States and Europe believe currency manipulation explains why China continues to have such a large trade surplus with most of the developed world.
China is facing mounting international pressure from not only the United States but Europe to show more flexibility on the currency issue. When the world economy was booming, countries were willing to tolerate job losses to cheaper Chinese imports. But today, the focus almost everywhere is on keeping and creating jobs, and nations cannot afford to lose jobs to China the way they could two years ago.
In addition, U.S. policymakers had resisted branding China a currency manipulator, fearing it would stop China from buying U.S. government debt. China and Japan rival each other as the largest purchaser of U.S. debt.
But in recent weeks, even the staunchest of free trade advocates have condemned Chinese currency practices as harmful to U.S. jobs. These include C. Fred Bergsten, director of the Peterson Institute for International Economics, who believes China’s fixed exchange rate is costing America at least 1.5 million jobs.
Pressure was building in Congress for action against China. Sen. Charles Schumer, D-N.Y., is advancing bipartisan legislation to get tough with China.