US Treasury Secretary Jacob Lew urged China to liberalise trade of the yuan in an "orderly and transparent way," the Treasury said Wednesday, amid market worries of a sharp devaluation. In a phone call late Tuesday with Chinese Vice Premier Wang Yang, Lew also stressed the need for Beijing and Washington to work together to craft a strong UN Security Council resolution on North Korea's January 6 nuclear test.
In the call, Lew mainly focused on Washington's view that China needs to proceed with planned reforms even as its economy threatens a further slowdown that can drag down the global economy. "Secretary Lew reiterated the importance of China supporting household income and rebalancing towards consumption-led growth, including through appropriate fiscal policies," the Treasury said.
He "expressed confidence that if China implements the reforms it has set out, it has the necessary tools to support domestic demand and succeed in this economic transition." Lew also emphasised the importance of China "making its transition to a market-determined exchange rate in an orderly and transparent way," and explaining its actions to the market clearly. China's seeming hesitant moves to liberalise its currency have exacerbated volatile capital flows and market movements.
The currency has fallen modestly against the dollar but more sharply against some other major currencies since August. Some analysts suspect a sharper devaluation is in the works that could increase the turmoil in global markets. On North Korea, Lew told Wang there needed to be a "swift, robust international response" to Pyongyang's test of a nuclear weapon in early January.
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