Treasury official: China ready for currency flexibility

[HenryTo]

Key quote: "Mid-level officials discussed exchange-rate policies, central bank open market activities and other subjects for about two and a half hours, spokesman Tony Fratto said." Probably nothing significant will come out of this meeting. The question is: Will the tariff really go through? We will see, and if so, it will be immensely bearish for the global economy and the U.S. will ultimately lose many more jobs than it will save (in declining, not-much-valued-added industries).
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Treasury official: China ready for currency flexibility
By Robert Schroeder, MarketWatch
Last Update: 7:03 PM ET May 9, 2005

WASHINGTON (MarketWatch) -- China has made "sufficient progress" to introduce exchange rate flexibility now, a U.S. Treasury spokesman said Monday following meetings between Chinese and U.S. financial officials.

Mid-level officials discussed exchange-rate policies, central bank open market activities and other subjects for about two and a half hours, spokesman Tony Fratto said.

U.S. and Chinese financial officials may meet again as soon as this summer in Beijing to discuss non-performing loans in Chinese banks, he said.

Separately, Treasury Secretary John Snow told reporters in Hartford, Conn., Monday that it is time for China to make its currency, the yuan, more flexible. Flexibility could mean widening the yuan's peg to the dollar, now at 8.28.

U.S. officials, including Snow, have been saying for more than a month that China is ready to take the next step toward an exchange rate that's determined by market forces, rather than controlled by the central bank.

Fratto said he would not speculate about when China would move to revalue the yuan.

China has pegged the yuan to the dollar at the rate of 8.28 since June 1995. Legislation sponsored by Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., would force the Chinese to negotiate a yuan revaluation with the U.S. or face high tariffs for Chinese goods.

Critics of Chinese policy say Beijing is manipulating the yuan to make its exports cheaper, costing hundreds of thousands of American jobs.