Back during his confirmation hearings, Treasury secretary Timothy Geithner was pretty outspoken about his beliefs regarding China a currency manipulation. However, now that he is Treasury secretary, his stance appears to have softened. In a semi-annual report on currency exchange rates, the Treasury has exonerated China of the charge of currency manipulation.
While it is certainly conceivable that part of the soft language is to do with China’s increasing desire to diversify out of U.S. assets, there is also evidence that China is backing off on techniques that some have seen as currency manipulation. The Forex Blog reports on some of the evidence:
There is also mounting economic evidence that China is no longer manipulating the Yuan, at least not to the same extent as before. China’s foreign exchange reserves, which it must accumulate as part of its efforts to depress its currency, are growing at the slowest pace in nearly a decade.
It is possible that China, aiming to become the economic superpower, realizes that it is going to need a more open economy and a currency that is closer to free floating on the FX market.
China’s economic growth continues to slow
China is also in the news for its economic growth numbers. Quarter 1 numbers are in, and the Chinese economy grew at a rate of 6.1% — the slowest its grown in 10 years. So far, China is not on track to hit the 8% growth forecasted for this year. However, Chinese officials insist that there are signs that the economy has bottomed out and that growth should be the norm for the remainder of the year.
See Also
- Economy and Exchange Rates
Currency exchange and the FX market