U.S. Treasury Secretary Henry Paulson Wednesday told a congressional panel that it is in China's interest to permit its currency's exchange value to be determined by market forces. VOA's Barry Wood has more.
Paulson defended the Bush administration's decision last week refusing to name China as a currency manipulator. The former Wall Street banker told the financial services committee that Beijing does not meet the technical requirements of currency manipulation, even though it holds the yuan's value more or less steady against the dollar.
There is immense pressure in U.S. Congress for a yuan revaluation, a move lawmakers believe would help bring down America's huge trade deficit with China. Many U.S. manufacturers and members of Congress say China keeps its currency artificially cheap, which gives Chinese-made products an unfair price advantage on world markets, and contributes to the huge U.S. trade deficit with China. Some members of Congress say the yuan is undervalued by from 15 to 40 percent.
Paulson told the committee that he too is frustrated by the slow pace of liberalization in China's financial markets, but he believes it will happen. "Now what I've said to you is that they made a decision to reform their currency. They said they are going to appreciate it gradually. That they recognize the principle and that they also place a big premium on stability," he said.
China is said to face considerable pressure from its exporters who oppose a repid revalution, fearing a loss of competitiveness against other Asian exporters. Since modifying its rigid currency link to the dollar two years ago, the yuan has gained about eight percent against the dollar.
Last month, Paulson hosted a cabinet level conference on the U.S. China economic relationship, a strategic dialogue that will be resumed next December in Beijing.
On other matters, Paulson said the world economy is in good shape with growth gaining momentum in Europe and Asia. He said the U.S. economy appears to be picking up and that growth should accelerate in the second half of the year.