–Senate Banking Chief Dodd: Need ‘New Policies’ On China FX
–Sen. Dodd: China is Doing “Egregious Manipulation”
–Sen. Shelby: ‘No Question” China Is Manipulating Its Currency
–Treasury Secretary: Yuan Is ‘Significantly Undervalued’
–Tsy’s Geithner: Expects G-20 To Focus On China Currency

By John Shaw

WASHINGTON (MNI) – Senior members of the Senate Banking Committee
told Treasury Secretary Tim Geithner Thursday that they are very
frustrated by the pace of currency reform in China, charging the Obama
administration has yet to find an effective way of compelling badly
needed changes in China’s currency policies.

Senate Banking Committee Chairman Chris Dodd opened the hearing by
telling Geithner that Chinese currency reform is “long overdue” and that
American policymakers need “concrete action” rather than pledges to
reform at some time in the future.

“We need some new policies,” Dodd said, adding that lawmakers are
frustrated by the “egregious manipulation” of China’s currency.

Dodd said he is puzzled why the Obama administration — and other
American administrations extending back to President Reagan — have been
“reluctant” to call China a currency manipulator.

Sen. Richard Shelby, the ranking Republican on the Banking
Committee, said there is “no question” that China is manipulating its
currency. He accused the administration of “protecting” China by failing
to declare it a currency manipulator.

“The Chinese will continue to negotiate … . (but) the time for
talking has long passed,” Shelby said.

Geithner made no attempt to defend China, saying China’s economic
policies are “designed to keep the currency undervalued,” he said.

The yuan, Geithner said, is “significantly undervalued,” adding
that it is “unambiguously true” that China intervenes to keep the value
of its currency low.

Geithner said that other nations are “reluctant” to launch an “open
and direct” challenge to China’s currency practices, preferring that the
U.S. take the lead.

Geithner said that he believes the coming G-20 meeting in South
Korea will have a “significant focus” on China’s currency policies.

But Geithner said that he does see signs that China has “began than
shift” in its economy to one that is less driven by exports and more by
domestic demand.

The Treasury secretary said the Chinese economy “looks very
resilient” and is likely to experience “quite high levels of growth” for
some time. He noted that some experts believe that China can grow at 8%
for a “sustained period of time.”

Geithner said that the U.S.’s current foreign exchange law, which
uses the term of manipulation and requires assumptions about intent, is
“not an effective tool.”

Geithner declined to respond directly to a assertion by Federal
Reserve Board Chairman Ben Bernanke that China’s currency policies
represent an export subsidy.

He said export subsidy is a “technical term” in U.S. law and he is
not prepared to say if China’s currency policies meet the precise
strictures of that law.

** Market News International Washington Bureau: 202-371-2121 **

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