Geithner to Meet With the Chinese Vice Premier

Geithner to Meet With the Chinese Vice Premier
By VIKAS BAJAJ and KEITH BRADSHER
Copyright by The New York Times
Published: April 7, 2010
http://www.nytimes.com/2010/04/08/business/global/08yuan.html?ref=global-home


MUMBAI — In a sign of improving economic relations between the United States and China, the Treasury secretary, Timothy F. Geithner, will meet the Chinese vice prime minister, Wang Qishan, in Beijing on Thursday on his way back to the United States from India, a Treasury spokesman said here Wednesday.

The unexpected meeting comes amid a flurry of diplomatic activity between Washington and Beijing to avoid a confrontation on China’s policy of keeping its currency, the renminbi, pegged to the dollar at a nearly fixed exchange rate of about 6.827.

Critics in the U.S. Congress and elsewhere say the policy artificially bolsters Chinese exports at the expense of American jobs by making them less expensive. Economists estimate that the value of the renminbi could be 20 percent to 40 percent higher against the dollar if Beijing allowed it to trade freely.

On Saturday, the Treasury Department delayed a report on foreign exchange rates to Congress beyond an April 15 deadline. Many lawmakers in Washington had been pushing the Treasury to officially declare China a currency manipulator in that report, which would have been largely symbolic but could have allowed Washington to retaliate against Chinese policies.

China has also made overtures to Washington in recent days. Last week, Beijing said that President Hu Jintao would visit Washington on Monday and Tuesday for a nuclear security meeting, just before the April 15 deadline that the Treasury later put off. This week, a Chinese agency appeared to warn exporters about protecting themselves, presumably from a revaluation of the renminbi.

Mr. Wang, the vice prime minister, is an influential economic policy maker in Beijing who was the primary point of contact for Henry M. Paulson Jr., the former Treasury secretary who started a strategic economic dialogue with China in part to persuade the country to allow its currency to rise against the dollar. From 2005 to 2008, China allowed the renminbi to appreciate about 20 percent against the dollar.

Economists said they did not expect Mr. Geithner’s visit to Beijing to produce any immediate breakthroughs on currency policy, as Chinese officials have gone out of their way to signal that they would not make any policy shift that might make it look to their own people as if they were backing down in the face of American pressure.

Mr. Geithner has been cautious about not seeming to push China hard in public, and he was conspicuously silent about the renminbi during March, when the Chinese Commerce Ministry issued a flurry of combative statements warning that American pressure on the currency issue could lead to a trade war. Mr. Geithner would not take questions about his visit from reporters Wednesday.

A spokesman, Andrew Williams, said Mr. Geithner and Mr. Wang had been trying to meet for some time and they confirmed the Thursday get-together on Tuesday, while Mr. Geithner was on a two-day trip to India. Mr. Williams declined to say whether a renminbi revaluation would be part of the discussion.

Stephen Green, an economist in the Shanghai office of Standard Chartered, said Mr. Geithner would have to choose his words carefully in Beijing, particularly in any public appearances. Mr. Geithner, Mr. Green said, needs to meet criticisms in the United States that he is too soft on China while at the same time not interfering with any gradual shift in the consensus among Chinese officials toward allowing the renminbi to inch up this year.

“He’s obviously got to play a delicate balancing act,” he added.

Mr. Green said that there was virtually no chance that China would announce a change during or immediately after the Treasury secretary’s visit. “The game plan is to move gradually to more flexibility in the second quarter,” he said.

China has been letting the renminbi edge up almost imperceptibly in the past few days in trading in Shanghai. The currency has stayed close to 6.827 per dollar since July 2008, but the official fixing for the start of trading on Wednesday in Shanghai was 6.8259, the first time this year that the government has allowed the currency to open at a level stronger than 6.826.

The currency has bobbed up and down lately. The government has been worried that many exporters earn revenue in dollars, and sign contracts three months or more in advance, but incur many of their costs in renminbi. By allowing even a slight variation in the currency, the government may be signaling to exporters that they should begin preparing for the possibility of a stronger renminbi, by giving fewer discounts on sales contracts or by keeping a particularly close eye on costs.
In Asian trading before the announcement of Mr. Geithner’s meeting with Mr. Wang, the value of yuan forward contracts rose. The one-year contracts are used to speculate on the renminbi’s value in the future, and traded 0.1 percent higher at 6.6303 per dollar, according to Bloomberg News.

Mr. Geithner has been careful not to talk about the renminbi during his trip to India. He told a television reporter that revaluing the currency was China’s “choice.”

Officials in India, whose currency has appreciated about 14 percent against the dollar in the past 13 months, have also avoided discussing the renminbi, choosing to treat it as a bilateral issue between the United States and China, even though India’s exports have become less competitive relative to China as a result of Beijing’s currency policy.

China is “becoming more open to the world, and with that, you’re going to see the currency take on a broader role internationally,” Mr. Geithner said on Bloomberg Television in an interview to be broadcast. “That’s a healthy, necessary adjustment,” he added.

Also on Wednesday, the People’s Bank of China said it would sell 15 billion renminbi, the equivalent of $2.2 billion, in three-year bills at higher interest rates than what bills are trading at now. The decision suggests that policy makers may be preparing ground for a revaluation of the currency and are trying to cool down the economy.

Mr. Geithner had lunch Wednesday with senior Indian business executives, including Ratan Tata, who heads the biggest Indian conglomerate of companies, and Mukesh Ambani, one of the world’s richest men.

The 30-member Organization for Economic Cooperation and Development reiterated its calls to Beijing on Wednesday to allow the renminbi to appreciate, Matthew Saltmarsh reported from Paris.

“We of course all know that there is one key currency that we recommend should move from its current level and start appreciating, and of course I’m thinking about the Chinese currency,” the organization’s chief economist, Pier Carlo Padoan, said in Paris.

“That would add positively to the issue of global imbalances” and it “would also probably add to global growth,” he said. The O.E.C.D. made a similar recommendation in a survey of the Chinese economy released in March.


Keith Bradsher reported from Hong Kong.