‘Not only yuan, but 4 other Asian currencies’

08:53, March 25, 2010      

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A leading American economist told U.S. Congress on Wednesday that Obama administration should ratchet up the heat on five Asian economies – not just China – to revalue their currencies against the greenback.

C. Fred Bergsten, head of the Peterson Institute for International Economics, told the House Ways and Means Committee that a successful U.S. campaign to pressure Asian economies on the currency issue could create as many as 1.2 million new American jobs.
Bergsten even recommended the U.S. government list China and four other Asian economies as “currency manipulators” in a report due in mid April, putting more gravity on them.

Bergsten said that not only is China’s mainland keeping its currency undervalued against the dollar, but Hong Kong, Taiwan, Malaysia and Singapore are keeping their currencies undervalued.

Bergsten said that realigning the exchange rate between U.S. dollar and the five Asian currencies would be the “most cost-effective step that can be taken to reduce the unemployment rate in the United States.”

The economist said in his congressional testimony that he believes the yuan is undervalued by about 40 percent against the dollar, and the other currencies are similarly undervalued.

Bergsten said allowing those currencies to rise against the dollar to the proper levels would trim America's trade deficit by US$100 billion to US$150 billion annually.

He said a fall in the value of the dollar against the Asian currencies would boost U.S. exports and result in an additional 600,000 to 1.2 million jobs during a time of high unemployment in America.

Last month, U.S. President Barack Obama vowed to "get much tougher" in trade disputes with China but the administration has given no hint on how it might rule in the upcoming trade report, which is due on April 15.

Meanwhile, U.S. Treasury Secretary Timothy Geithner Wednesday repeated his belief that China would soon allow its currency to start rising again against the dollar.

China allowed the yuan to appreciate by about 21 percent from mid-2005 to mid-2008 but halted the rise after the global economic crisis began to cut deeply into its exports.
"I think they'll come to decide it is in their interest that they move," Geithner said in an interview on CNN. "I think it is quite likely that they move over time."

Geithner said he was not worried that the administration's leverage over China will be constrained by the large federal budget deficits that need to be financed by foreign investors including China.

"We have enormous stakes in a strong China," Geithner said. "And they have enormous stakes in having access to our markets, being able to sell goods here."

People’s Daily Online
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