US President Barack Obama's administration on Tuesday heaped rare praise on China for its growth strategy even as lawmakers accused Beijing of hiding evidence of currency manipulation to gain an unfair trade edge. Obama's finance chief Timothy Geithner said export-driven China's shift in its development strategy to rely more on domestic consumption was "encouraging" and had led to a jump in US exports to the world's most populous nation.
He cited a jump of almost 50 percent in US exports to China compared to a 20-percent rise to the rest of the world in the first quarter of this year. The much more rapid growth in exports to China came as the world's most populous nation was expanding faster than the rest of the world but "also because China is changing how it grows," Treasury Secretary Geithner said after visiting a Boeing 737 plant in Washington state.
"After decades of reliance on exports for economic growth, China is now shifting its development strategy to rely more on domestic consumption by the Chinese people," he said. The United States had often linked longstanding pressure on China to reform its largely undervalued currency to Beijing's heavy reliance on exports as a money spinner - instead of spurring domestic consumption.
Ten US Senators on Tuesday pressed Geithner to push China to release an International Monetary Fund report they said could be the smoking gun proving Beijing manipulated its yuan currency. The lawmakers charged that China was hiding evidence it manipulates the yuan by exercising its right, under IMF rules, not to let an annual IMF staff report on its currency practices see the light of day.
Ninety percent of countries make such reports public, and "China's failure to do so in 2009, despite regularly opting for transparency in previous years, is troubling, suggesting that China seeks to suppress any findings critical of China's manipulation of the value of its currency," the senators said.
The senators have backed legislation, unveiled in March, to make it harder for the US Treasury Department to avoid designating a country as a currency manipulator, which would trigger retaliatory sanctions. Thanks to its competitive exports, China has chalked up the world's biggest foreign exchange reserves to the tune of 2.447 trillion dollars.
Just two months ago, Obama himself made a strong pitch for China to revalue its currency, saying the world needed to rebalance the mix of exports and imports driving growth after the financial crisis. Countries with external deficits, such as the United States, need to save and export more while those with surpluses, like China, need to boost consumption and domestic demand, Obama said.
"China moving to a more market-oriented exchange rate will make an essential contribution to that global rebalancing effort," the US leader had said. Geithner, speaking ahead of key talks with Chinese leaders next week, said the development transition in China would expand what was already an important market for US exports. He and Secretary of State Hillary Clinton will meet their Chinese counterparts for talks under the US-China Strategic and Economic Dialogue on May 24-25.
Some analysts questioned Geithner's judgement on China's development strategy shift, saying Beijing was in fact set to be more reliant on exports fuelled by investment. "The Chinese are keen to rebalance growth towards domestic consumption but in fact their main driver of growth over the past two years has been investment," noted Eswar Prasad, a former head of the IMF's China division.
"This surge in investment and the industrial capacity being built up could well make them even more dependent on exports in the next few years," he told AFP. "Geithner is clearly keen to set an amicable tone before the meetings next week in China, where a lot of tough and contentious issues will have to be discussed."
Geithner said that at the talks with Chinese leaders, he would push for reducing the challenges faced by US companies trying to export to China and to produce in that country. He said American companies were "very concerned" with China's new "indigenous innovation" program, which provided preferential treatment for some locally produced products in government purchases and put American firms at a competitive disadvantage. China also needed to do more to protect intellectual property rights and reduce subsidies to local companies, he said.
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