China currency stance 'impeding reforms', says Geithner

Image caption,
The value of the Chinese yuan has been pegged to the dollar since 2008

US politicians have repeated threats to impose trade sanctions on China if it continues to refuse to revalue its currency, the yuan.

Both Democrats and Republicans on the Senate Finance Committee warned US Treasury Secretary Timothy Geithner that their patience was wearing thin.

Mr Geithner said China's stance was impeding global economic reforms.

The US has long complained that Beijing keeps the yuan undervalued against the US dollar to gain a trade advantage.

Some analysts argue the yuan is undervalued by as much as 40%.

Senator Charles Schumer, a leading Democrat, said he was confident a bill imposing sanctions on China would be passed successfully if needed.

"The issue here is not US protectionism but China's flouting of the rules of free trade," he said

'Flexibility needed'

Mr Geithner told the committee that distortions caused by China's stance were "an impediment to the global rebalancing we need".

China pegged the value of the yuan to the US dollar in 2008 in order to keep its exporters competitive amid falling demand in the global recession.

Mr Geithner said that Beijing's shackling of its currency, also known as the Renminbi (RMB), to the dollar was causing other Asian countries to intervene in foreign exchange markets at record levels.

"A more flexible RMB will allow market forces to play a more active role over time in facilitating strong, balanced and sustainable growth globally," Mr Geithner said.

Last month, at high level trade talks with the US, China said it would seek "gradual progress" on reforming the exchange rate of the yuan, but set no timetable for doing so.

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