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A New U.S. Policy for China?

Until today, China wonks have had little sense of how the new Obama administration will handle relations with Beijing. Today's written testimony from Treasury Secretary-designate Timothy Geithner hinted at a new, tougher tone.

"President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency," Geithner wrote, adding that Obama would "use aggressively all the diplomatic avenues open to him to seek change in China's currency practices."

Exactly what that's going to mean for policy is unclear. Geithner did not say whether the Treasury would formally name China as an exchange rate manipulator in its annual currency report. "The question is how and when to broach the subject in order to do more good than harm," he said.

Former President Bush came into office calling China a "strategic competitor," a jab at the Clinton years when China and the United States sought to forge a "strategic partnership." But after 9/11 the Washington-Beijing relationship improved dramatically. Indeed, it's arguable that one of Bush's few big foreign policy successes was how he handled relations with Beijing. (See this fascinating talk by Bush's National Security Council Asia director Dennis Wilder.) While Bush's treasury secretary, Henry Paulson, never accused China of manipulating its currency, he did pressure China to allow its yuan to appreciate against the U.S. dollar, which it did -- somewhat.

Obama's inauguration was well-covered in the Chinese media. Of course, the censors were busy; they cut his reference to the fight against Communism and being on "the wrong side of history." But in general it was accurate, and even playful.

One cartoon-story showed Obama, dressed up as Superman, asking his "Chinese girlfriend" for "yet more money." (China is the largest foreign holder of U.S. Treasuries after Japan.) She replies: "The Chinese girlfriend may take a more prudent attitude towards lending money to O-Superman." Somebody should tell that to Geithner.

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Comments (64)

Brian75 Author Profile Page:
Indep_Observer Author Profile Page:

The Japanese for years have been keeping their Yen steady and low in relation to the US $.
See:
http://www.atimes.com/atimes/Japan/KB04Dh01.html

Apparently the gross holdings of US $ of Japan are up to twice that of China. However you didn't hear the last US Administration or this current one castigate the Japanese for keeping their currency low. In addition the Japanese market has many subtle import restrictions (e.g. rice, beef) and their exports to the US are in high-end goods such as automobiles and electronics.

juzsmart Author Profile Page:

Tim Geithner has unwittingly shot himself in the foot and did China a favor. In times like this, a strong currency depicts confidence and China can profit from a gradual strengthening. The bottom line is, both China and Japan may be better prepared for a more protectionist America than most people realized. At worst, the world will expect a "lesser America" and adapt to it. The trajectory is clear that a low savings, high spending economy like the US on borrowed money is not sustainable. There is no moral virtue or practical good in such a regime. The world will come to terms with this. Can America face up to a lesser role ?

voter Author Profile Page:

Jaihind & Citizenofthepost-Americanworld,

Thank you for your participation, I enjoy reading your comments.

Citizenofthepost-Americanworld Author Profile Page:

Thanks, Jaihind. You are quite right: the quote came from “War Is a Force That Gives Us Meaning”, by Chris Hedges. I am glad to see his most remarkable book had such an influence on me. Next to that quote, I had written: “Chuang Tzu” (one of the ways for an older man to refer to Zhuang Zi). --- Mind you, I had written the quote was “from Zhuang Zi, I believe”... Anyhow, no question, I still owe you Zhuang Zi's.

Here is one of them, in context, from "The Writings of Chuang Tzu", James Legge, 1891, where it is to be found alongside the Chinese text, for your perusal. * Let me insist: it is the spirit of that whole section that concerns me, not so much the individual quote, “word for word” (or character by character), so to speak…

讓王 - Kings who have wished to resign the Throne

“We have heard that the officers of old, in an age of good government, did not shrink from their duties, and in an age of disorder did not recklessly seek to remain in office. Now the kingdom is in a state of darkness; the virtue of Zhou is decayed. Than to join with it and lay our persons in the dust, it is better for us to abandon it, and maintain the purity of our conduct.'”

To show how far those gentlemen were prepared to go to preserve their humanity, Zhuang Zi adds:

“The two princes then went north to the hill of Shou-yang, where they died of starvation. (…) this was the style of these two princes.”

For good measure, need one add that the same message is to be found in Plato’s “Apology of Socrates”?

*
http://chinese.dsturgeon.net/text.pl?node=2965&if=en

JAIHIND Author Profile Page:

Citizenofthepost-Americanworld,

the phrase you quoted didn't sound like it would be Zhuang Zi's...
I searched it out and found it to be by New York Times reporter Chris Hedges and to be related to actual war experiences.

In its context it goes like this:
"In the rise to power, we always become smaller. Power absorbs us, and once power is obtained we are its pawn. As in Shakespeare's Richard III, the all-powerful prince who molded the world, we swiftly fall prey to the forces we thought we had harnessed. Shakespeare's Lear and Richard II gain knowledge only as they are pushed down the ladder, as they are stripped of all illusions. Love may not always triumph, but it keeps us human. It offers the only chance to escape from the contagion of war. Perhaps it is the only antidote. And there are times when remaining human is the only victory possible."

hlp2 Author Profile Page:

Correction:

... Just watch, the White House will backpedal fast from Geithner's remarks and try to clean up the mess created by Geithner's utter incompetence.

hlp2 Author Profile Page:

A new China policy?

Before being elected, G.W. Bush bashed China hard and Bill Clinton bashed China harder, all promised a new and more hard-lined China policy. Guess what happened?

To his credit, Obama did little China bashing during the election, compared to his predecessors and his opponents Hillary Clinton and John McCain. Right now he needs to borrow 1 trillion dollars for the stimulus package and jump start the US/world economy and financial markets, why would he want to start a trade war with China at this time?

Unfortunately, Timothy Geithner, the tax cheat who presided over the world's largest financial disaster ever and the pathetic $350 billion TARP bailout, will be responsible for the stimulus and rescue of our economy. It is hard to believe that Geithner even comprehends the literal meaning of a "China policy". For years, Paulson and Bernanke had tried hard to push China to strengthen yuan but never put the two words "currency" and "manipulation" together when talking about China. Just watch, the White House will backpedal fast from Geithner's remarks and try to clean up the mess created by Geithner's utter competence.

Citizenofthepost-Americanworld Author Profile Page:

Jaihind,

Sorry for the confusion. I did not even suspect you were European.

I am not sure we need to go into the "post-American" business in detail here. Suffice to say by that expression I only mean to refer to our multipolar world, to be soon characterized by a new world order, beyond American hegemony, as per much of what one can find in so many international publications on the subject. Fareed Zakaria's book "The Post-American World" is only one of them.

I would tend to agree with you that among "the most evolved countries in terms of education, equal opportunities, respect of human rights, social security and so forth", one finds the Scandinavian countries, for which I have a lot of respect and admiration.

We need not agree on China.

In these troubled times, matters more this, from Zhuang Zi, I believe: "there are times when remaining human is the only victory possible."


va22207 Author Profile Page:

Geithner's action shows he is out of touch.
His comments makes the market think that the CNY will be forced to go higher vs USD.
This expectation will make the market to move against T-Bond and make US interest higher.
Come on Geithner, we need LOWER interest rate without inflation to fight the wall street crisis.
Look around the world, only the Chinese are buying T-Bond at the silly 3.x% rate. On the other hand, are our closest allies helping us?
They will, if they could, try to defeat USD so that Euro can achieve the world currency status enjoyed by USD since WWII. So, the CNY is the de facto ally of the USD now.

JAIHIND Author Profile Page:

Citizenofthepost-Americanworld,
I am sorry but I still don't follow your argument...

Maybe, it is because I am not even American, so when you write "we" I am at a loss. Or maybe, because as a European I have always been very critical of Bush's US politics anyway. Or maybe it's simply because I don't buy your post-American wishful thinking...
If any place I consider the Scandinavian countries the most evolved in terms of education, equal opportunities, respect of human rights, social security and so forth.

Post-American in terms of Scandinavian yes, but post-American in terms of Communist China... Give me a break!

thmak Author Profile Page:

The idea of subjecting China's currency to world market is equivalent to ask China to strip off her financial defense and let the world's financial institutions to invade China's financial turf. Combined, the clout of the Western financial instituions is stronger than that of China. The consequence of that financial invasion is the collapse of the Chinese economy leading to subjugation and control/takeover of the Chinese economy by Western financial institutions.

voter Author Profile Page:

To Mr. Pomfret and all:

Wishing you a Happy and Prosperous Ox Year.

Indep_Observer Author Profile Page:

As far as currency trading the Chinese Yuan until recently was not freely traded anywhere in the world (Hong Kong and Macau have just been authorized to do so). The foreign banks and other market makers allowed into China do X-trades that have nothing to do with the Yuan. The Chinese Yuan has been out of the loop in currency exchanges around the world. This means that no manipulation of Yuan (RMB) could occur between or with FX traders on the world currency exchanges.
This, then, comes back to China and US Treasury bonds. As I do believe until recently, the Chinese Central Bank was mostly long on the US Treasuries throughout the last decade.
Are people suggesting that they stop buying US Treasuries or even short them to raise the value of their currency? There are implications for US Treasury bond auctions, interest rates and inflation.
The Chinese at this time in their economic development and with the financial crisis are not likely to free float their currency and be at the mercy of the markets. Speculators seeking returns would send money in like a tsunami and after making their gains pull it out and in the process damaage the Chinese financial system and economy. The Bretton Woods Agreement prior to 1971 (Remember that? Fixed currencies, etc..) was supposed to prevent something similar happening in the West. The rules since then have been changed in the West and played out likewise there. Don't expect China to follow suit especially when they see the consequences of financial de-regulation and lax oversight and enforcement.

Indep_Observer Author Profile Page:

Test2

voter Author Profile Page:

@dePaulconsgilio:
Can you explain further?

thank you.

depaulconsiglio Author Profile Page:

Did we do anything with Japan's investments in the US Real Estate market in the 1980's?
No. We didn't.
This time it is debt and money supply.
However, remember that economics has a psychology all its own. So when treating the patient with a Dr of Psychology's recomendations, make sure that you have all of the facts of his case before prescribing him over to a psychiatrist for medical evaluation.

Otherwise, a wrongly diagnosed "depression" could turn into "mania" quite soon afterwards.

Caveat emptor.

Regards
dePaul Consiglio
NYMetroCityStateUS

voter Author Profile Page:

http://online.wsj.com/article/SB123293057464414089.html

Here's an opposing view regarding Geithner's statement on China.

Lauren Keane Author Profile Page:

test

Citizenofthepost-Americanworld Author Profile Page:

Jaihind, sorry to be so blunt but... do you really need to make such an effort to prove John Gray right?

"The perception that countries which subscribe to none of the tenets of “the American Creed” are surpassing the United States is too painful to enter into public consciousness... For most Americans such a perception is intolerable.... evidence of the superior economic growth, saving rates, educational standards and family stability of countries that have repudiated the American model will be repressed, denied and resisted indefatigably."

As so many comments made here have shown for quite some time now, this ongoing discussion is not just on the Chinese currency, it is not just on a new US policy for China. This ongoing discussion is on geopolitics, on US foreign policy in general, and on American public perception and opinion. It therefore relates to the role this country plays in this world and, when it comes to economics, to how it competes (or refuses to compete).

We should therefore, I believe, take the broader view. Should you not fancy John Gray's, you may refer to, amongst so many others, John Perkins ("Economic Hit Man"), to John Pilger (more particularly, but not exclusively, on our role in Latin America), to sociologist Jean Ziegler (more particularly, but not exclusively, on our role in Africa) and to Noam Chomsky (on how consistent US foreign policy has so far been, throughout the world).

There are enough facts examined there (and enough of a nationalistic political programme in President Obama's inaugural speech, incidentally) for you to wish, perhaps, to revise your opinion that "talking about economic competition in terms of nations (and "self-interest"? -- Obama) is outdated thinking..."

As for sports, you may want to review the way we reacted publicly to being surpassed by China at the latest Olympic Games, in Beijing. It is still all there for the world to see, and appreciate.

vmoore55 Author Profile Page:

All the Chinese in China has to do is to go back to one bowl of rice a day for the next 4 years and wait for O Superman to do his thing, pulling the US down to a 3rd world country.

JAIHIND Author Profile Page:

"I find fascinating the fact that we seem unable to compete in this world, without resorting to crude violence the moment we understand we are being defeated. Why do we so typically feel the urge to accuse the winner of “cheating”, whenever it has become clear to everyone that we have been surpassed?"

I don't quite follow...
"compete"?
The arrival of China in the world market has been a boost to most economies in the world; even American businesses and consumers have profited a lot from it. That every boom is followed by a bust is a truth that has been re-enacted the world over for thousands of years. It's nothing special - and it is hitting the PRC as hard as it is hitting the US and everyone else.
The world economy has already been integrated to such an extent, that talking about economic competition in terms of nations is outdated thinking...

"crude violence"?
The talk is about currency value adjustments. In contrast to the US dollar and the Yen the Yuan is not traded freely, so its value is a matter of government decision. If the CCP controls the yuan's value, it will have to live with the fact that it is being made responsible and that it will have to answer...

"defeated"?
Whatever that is supposed to mean in this context, China has a long way to go before it is an equal to the US in terms of economics, politics, science and so forth - if ever...

"winner" & "surpassed"?
We will have to see how China evolves in the next years. The US democracy has a few hundred years of experience, whereas the CCP is 50 years old - and all of its comrade Communist governments are already dead...

JAIHIND Author Profile Page:

Citizenofthepost-Americanworld,
you wrote:
"While thinking may be dangerous, debating is undoubtedly considered lethal. It is reasonable to expect, however, that as the current US-generated, world depression deepens, out of sheer necessity, we may at last succeed in overcoming some of the taboos referred to above."

It's amazing that you should find the above to be true for the US (while it's undoubtedly true for the PRC!). As far as I could see, Gray's book is available on Amazon, you can read all kinds of reviews or views on it on the net.
I can't see any censorship...

What you meant was probably that you fancy the book a lot and you're disappointed that mainstream media don't share your enthusiasm.
Well, there's many books out there, and I guess mainstream media tend to reflect the interests of the mainstream middle class which at this stage doesn't appreciate the book as much as you do.
This does not mean the subject is taboo, it just doesn't have enough takers.
In the same way, I wouldn't say Zhuang Zi is a taboo - there's just not a whole lot of people taking an interest in his probably a lot more worthwhile writings... His was genuine thinking - but then that was ancient China...

Citizenofthepost-Americanworld Author Profile Page:

I find fascinating the fact that we seem unable to compete in this world, without resorting to crude violence the moment we understand we are being defeated. Why do we so typically feel the urge to accuse the winner of “cheating”, whenever it has become clear to everyone that we have been surpassed? That would seem to account for the fact that we have come to commonly view sports, for instance, as war, generally not a pretty sight.

LSE Professor John Gray: “The perception that countries which subscribe to none of the tenets of “the American Creed” are surpassing the United States is too painful to enter into public consciousness. To accept that countries can achieve modernity without revering the folkways of individualism, bowing to the cult of human rights or sharing the Enlightenment superstition of progress towards a world civilization, is to admit that America’s civil religion has been falsified. For most Americans such a perception is intolerable. Instead, evidence of the superior economic growth, saving rates, educational standards and family stability of countries that have repudiated the American model will be repressed, denied and resisted indefatigably. To admit this evidence would be to confront the social costs of the American free market. The free market works to weaken social cohesion. Its productivity is prodigious; but so are its human costs. At present the costs of the free market are taboo subjects in American discourse; they are voiced only by a handful of sceptical liberals. If the fact that free markets and social stability are at odds could be admitted, the conflict between them would not thereby disappear, but it could perhaps be moderated. The central dilemma of public policy today is how to reconcile the imperatives of deregulated markets with enduring human needs.” (“False Dawn, the Delusions of Global Capitalism”, pp. 131-2)

These subjects are indeed taboo: I am in a position to confirm the above quote has been repeatedly rejected (“censored” would be a better word) many times before, by the mainstream media! While thinking may be dangerous, debating is undoubtedly considered lethal. It is reasonable to expect, however, that as the current US-generated, world depression deepens, out of sheer necessity, we may at last succeed in overcoming some of the taboos referred to above.

thmak Author Profile Page:

To Nosmanic: Americans started the car, television, personal computer industries; but all these industries are dominated by foreign countries. The Americans have to blame themselves for not being competitive in this world. They pay themselves too high. Super markets and Walmart have eliminated small mom and pop shops. Do you blame them for stealing their jobs. I hope you understand. It is freedom and democracy that allow fraudalent people to cause this disastrous recession all over the world. I hope you understnd. It is not China that will own too much of US. It is US that is very willing to borrow in order to enjoy her high living standard just like people who borrow over their ability to pay to enjoy their life till bankruptcy. I hope you understand.
For the past 50+ years US has threatened China militarily by involving in her civil war, politically by isolating China internationally and economically by embargo and trade restrictions. There had been hostile US Soldiers in China but there is no hostile Chinese soldier in US. I hope you understand. Get out of you brainwashed ant-China mentality.

Last note unjustice anywhere threats freedom everywhere the revese is also true our freedom is a threatens China's communist party.

Nosmanic Author Profile Page:

"China to allow its yuan to appreciate against the U.S. dollar, which it did -- somewhat" somewhat means that China lets it's money fluctuate means that China lets it's money change from 1-5% against the US dollar but that can never go over a fixed rate. China has been cheating to steal American manufacturing and other jobs. China whines that it has to because otherwise they can keep the peace. They could if China allowed some real democracy in place.

At first I thought this is good but at the wrong time but then I realized this maybe the best chance to get change there because now China will need to change because of unrest because of unemployment and later China will own too much of the US and be too economically powerful for us to do anything.

Last note unjustice anywhere threats freedom everywhere the revese is also true our freedom is a threatens China's communist party.

thmak Author Profile Page:

Realizing that suppressing China by military and politcal maneuvers has failed for the last 50+ years, USA now tries to do that economically by forcing China to raise the exchange rate which is disastrous to China. The foreign exchange rate for China is 1 US$=6.86 Yuan, while that of Korean is 1391 Won and Japan 88.8 Yen. So Why USA does not accuse both Korea and Japan and command them to raise the level of China.

hawksmoor Author Profile Page:

After reading the comments here, I think a couple of things ought to be pointed out.

1. While China has loaned United States hundreds of billions of dollars, this only represent ~20% of all foreign ownership of U.S. Treasury Securities, which is about 25% of all U.S. debt. So while in absolute amounts, this sounds like a lot of money, lets just keep in mind that it amounts to about 5% of all U.S. debt.

2. As far as I know, these securities held by China are identical to securities sold to every other entity inside and outside the U.S., and can be traded between China and anyone else on the international market. Comments like "just cancel all the debt to China" makes absolutely no sense.

3. China isn't the evil communist empire out to destroy America by manipulating its currency, nor is it a timid banker that can bullied into lending America a helping hand whenever we can't balance our budgets. I think as China seek to bolster its internal consumption of goods, the yuan will appreciate, slowly over time.

Hypocrite1 Author Profile Page:

Indeed, somebody should tell that to Geithner! What a A$$! He did not pay tax and he still landed the job. If it were me, I would be in prison and looking for a lawyer now. What a nation! With his big mouth, Uncle Sam (of course it is us, taxpayers like you and me) is paying more interest on T bills. On personal level, he ruined it my hedge and I have to take some hefty loss. What a A$$!

voter Author Profile Page:

@shane_beck
"The best strategy would be to quietly pursue actions that would reduce US dependence upon Chinese imports, increase domestic savings and manipulate domestic public opinion against China."

I thought only a communist country can manipulate its public opinion. Do the people in the so-called free world not have their own free thinking too?


Jamesmoylan: If the Chinese marketplace is not integrated with the rest of the world in any meaningful way, what are all the American and Western corporations doing in China?


Magnifco1000: Perhaps China should impose a restriction on funding any U.S. debt until the U.S. reforms her ponzi ecomony and improves its own human rights record too.

ckk2008 Author Profile Page:

New administration,black president but the same old games against China. Beginning shot, currency manipulations,following next will be the Taiwan issue, poor human rights record ( within china and Africa(supportive efforts)and not forgetting comical sideshow,Dalai Lama shaking hands with the president at the white house all to the dismay and displeasure of the chinese.

voter Author Profile Page:

China and Chinese had a kick me sign at the back since the West invaded and tore China apart 2 centuries ago. And the West has been wearing a bully cap for the same amount of time.

Talk about the unfair trade all you want but it is the West that set up the rules, however unfair, a long time ago.

Kaydara Author Profile Page:

magnifco1000:

China and US are jointed at the hip for a long time. And the major reason why US gov. has been reluctant to antagonize China is because we need China to contain North Korea. As China's tentacles extends to Middle East, Africa and South America, US will find it more and more difficult to use China as a punching bag and blame the REDs for all the lost jobs at home. Who in hell wanted to move the factories to China to save cost in the first place? Who has been flocking to Wal-Mart to buy cheaper goods? Good business strategist is like a good chess player, you have to see moves before you move it.

Chinese government has a kick me sign on their back and deservedly so. But the factories and workers there are no different than any other countries providing factory services and trying to making a living for their families, no more, no less.

dahuanzhou Author Profile Page:

"Newsflash....China owns the majority of US Treasury Bonds after Japan. What happens when they decide to collect? "

Very simple: Declare China is a terrorist country and cencel all debt. This will lead to war of course. But US has way much more nuclear warheads, then you know the result.

I am shocked by the above statement.If this logic is right, then next month the Los Angeles Court will declare me to be a terrorist, because I asked an American boss to refund me my personal loan.What is more, I will worry about my safety of life.

magnifco1000 Author Profile Page:

China continues to hold inordinate sway over USA government policies. The USA has been very reluctant, especially under Bush, to criticize China for wide-spread human rights abuses, but quick to criticize others with even better human rights records then China (including Russia and Cuba). The bottom line is this, China has America under control because she has purchased so much of America's debt. Without the purchase of that debt, the American government would be unable to function. All China has to do is sell-off a portion of that debt and she could easily collapse the American dollar and what's left of the stock market. Yes, it would hurt China but it would hurt America much, much, more. That's because as the dollar collapsed, America would be thrown into crisis by a massive surge in inflation. This would be similiar to almost exactly what happened to Germany during the days of the Weimar Republic and that economic crisis paved the way for Hitler coming to power. The bottom line is this, America has to get out of debt to China. We also cannot compete with China's near slave labor economy and her prison labor. We need to impose significant trade tariffs on China until she reforms her economy and her human rights record.

jamesmoylan Author Profile Page:

There are an awful lot of very naive people submitting their opinions on this board.
People keep discounting the difference between China and the majority of other powerful countries. China enjoys a brittle command economy upon which has been overlaid a veneer of capitalism. When other countries purchase US Treasury bonds they are purchased on behalf of a free populace - when China purchases US Treasury bonds the purchase is undertaken by a totalitarian regime for the purposes of providing an outlet for the goods produced in their gulag of a country.
If China wants to try and strongarm the US the US can simply devalue the Chinese bonds as the entire Chinese marketplace is not integrated with the rest of the world in any meaningful way. The western world can struggle along without China but the current Chinese regime would fall in a bloody heap without the rest of the world propping it up.
(And revolution can't come fast enough.)

shane_beck Author Profile Page:

Even if the current administration believes that China is engaged actions unfavorable to the US, it makes no sense as a strategy to loudly declaim China or its actions since it has little chance of pressuring China to change it ways. The best strategy would be to quietly pursue actions that would reduce US dependence upon Chinese imports, increase domestic savings and manipulate domestic public opinion against China. Sure, it would be a long term strategy, but then containment of the Soviet Union took over 40 years...

Citizenofthepost-Americanworld Author Profile Page:

If only could be found one country or a series of countries which could be held responsible for this country's demise!

If only most Americans could be convinced their problems arise from the Chinese, for instance, 1. saving too much, 2. spending too little, 3. earning too little, 4. keeping the value of their currency artificially low, 5. stealing our intellectual property, 6. copying everything we painfully created, 7. competing unfairly, 8. heavily subsidising their agriculture and industries (something we ourselves would never even dream doing), 9. indulging in dumping practices (something we ourselves would never ever dream doing)... etc. without end. Anything would do, really, anything.

Yes, if only...

But as Obama has just said, "our time of standing pat, of protecting narrow interests and putting off unpleasant decisions — that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America."

As Pomfret remarks: "Exactly what that's going to mean for policy is unclear."

Yet one thing is as clear as daylight: as much as we may avoid holding our own both responsible and accountable for this Great Mess, nobody but ourselves is responsible for our national demise. Nobody but ourselves needs remake this country.

Blaming others continues to be only a ruinous waste of our time.

pgr88 Author Profile Page:

what a JOKE - every politician in the last 20 years has said they will "get tough" on China. We need to "get tough" on Washington and Congress instead.

Then they go out and beg China to buy our treasury bonds....

Pebble1776 Author Profile Page:

If the US SAVINGS RATE went back to normal levels, the trade deficit would shrink due to less spending and we could fund our own stimulus. It is time to stop kowtowing to these currency manipulators.

lenk Author Profile Page:

As a consumer in the US I wish China would manipulate its currency even lower! Without cheap imports from China my cost of living would be much higher.

But I don't think we can simultaneously borrow $1 trillion, have the dollar strengthen against the yuan, and keep massive inflation from crippling China's weak economy.

Then again, I'm not the financial genius who can almost do my own taxes correctly.

Kaydara Author Profile Page:

to OldAtlantic:

Maybe you and your chumps like Cheney should stand up and run the new internment camp?

Going forward into 21 Cent. Old Atlantic and all you bigots needs to stay just that, OldAtlantic and just fade away.

thegreatpotatospamof2003 Author Profile Page:

Unfortunately, mouthpieces like Pelosi (and now Geithner) do not understand the best way to talk to the Chinese about these issues and because of that they will fail.
---------

I understand the need to dance appropriately, but at a certain point, Obama HAS to distinguish himself and his policies as different from Cheney and Bush, if only to signal a new understanding of Chinese position.

Bush and Cheney were marked as suckers, same for Wall Street, I suppose, Geithner, while being more forthright, isn’t necessarily promoting a ham fisted, ham headed economic approach, ( ala Cheney and terrorism,) but more a simple awareness of the larger, economic, international picture.

At a certain point, intransigency simply for its own sake becomes a liability.

I applaud his first move.

fieldon Author Profile Page:

the thoughtless china-commentary shows us once more: tim geithner is a disastrous choice. one can only hope that the president drops the man. otherwise we shall see a continuance of licking the feet of wallstreet and the banks, as did greenspan and rubin, both catastrophically incompetent!

bokamba Author Profile Page:

I would enjoy seeing that "O-Superman" comic mentioned in the post.

wesatch Author Profile Page:

Tough, like the Fed was tough on Citi, Bear Stearns, Merrill, BofA, JPM, etc.,etc.,etc.?

Sounds like the same ol' eye wash to me.

Donald2 Author Profile Page:

"Newsflash....China owns the majority of US Treasury Bonds after Japan. What happens when they decide to collect? "

Very simple: Declare China is a terrorist country and cencel all debt. This will lead to war of course. But US has way much more nuclear warheads, then you know the result.

simplesimon33 Author Profile Page:

Being a pragmatist that President Obama is, his administration will NOT antagonize major creditor of US government, rhetoric aside. China knows this US dependence on Chinese investment as well. With deep pockets, China will continue to be the biggest buyer of US treasuries. Afterall China has to park it humongous dollar reserves somewhere and US treasuries even with the historically low returns are their safest bet as China knows all too well. While China’s present exports may be down with the worldwide economic melt down, China will be ready to ramp up its export machine again as and when circumstances change. China also knows that staying in good graces of Uncle Sam is their safest bet to keep exporting thereby keep earning more dollars and keep investing in US treasuries so that one day China can own US government literally.

cintronlourdes Author Profile Page:

No one can take this man seriously. He will go on practicing politics the way politics are usually practiced: vilely.

He must be made aware that, whenever his face is shown in pictures, video or in person, we see the mark of 'TE' (tax evader) on his forehead.

This man's presence will be a reminder, every time we see him, that our Congress and our shining new president believe that the rules do not apply to them, only to the little people.

Anything coming from this man will be tainted with the public's suspicion, with the conviction that, it don't matter what he says and does, it will be dishonest and contrary to the best interests of the people.

He is a Wall Street crook who got the job because his father was friends with our president's mother.

shahjahanbhatti1 Author Profile Page:

Chinese breakup will usher in the era of regional prosperity !

tropicalfolk Author Profile Page:

ROTFLMAO!!!!

Geither,
the man who didn't know how to fill his tax forms...
the man who oversaw the collapse of Wall Street...
the man who engineered the failed Paulson bailout...

is now throwing a tantrum: "the Chinese are bad!!!, ugly, ugly Chinese!!!"

Doesn't he know the American economy depends on foreign credit?
Doesn't he know the Chinese have been lending the US some $1 billion per day over the past decade in order to finance Americans' consumption?

Doesn't he know the Chinese hold around two trillion in US-dollar assets?

Didn't he know Wall Street has selling toxic paper (subprime mortgages packaged as AAA derivatives) to Chinese investors for almost a decade?

Is he aware that Chinese investors are no longer willing to buy that crap?

Obviously, Geithner is not just incompetent about taxes; he is truly stupid!!!!

Italiaxxx Author Profile Page:

Newsflash....China owns the majority of US Treasury Bonds after Japan. What happens when they decide to collect? Obama will be as quiet as a Church Mouse. This is all retoric. If you owe somebody 4 billion dollars are you really going to do anything to make them angry.

voter Author Profile Page:

Few years ago,someone told me she felt bad that we are buying all these Chinese goods at such a cheap price and the Chinese are being paid so cheaply for labor. My answer was, there is nothing wrong with selling and buying something at a competitive price. What we need to be ashamed of is the Chinese are making only a dollar a day, manage to save 40 cents and yet we ask them to loan their 40 cents to the US.

In the east, the cliche is "an empty barrel makes the most noise" where in the west, "the squicky door gets the oil." For both to be successful in working together, a compromise is inevitable. Give and take, both have to benefit and be reasonable, most importantly examine and solve your own problems first. Otherwise you can make all the noise and blame the whole world and it's not going to help you.

dahuanzhou Author Profile Page:

In his inaugural address, President Obama mentioned that “To those leaders around the globe who seek to sow conflict, or blame their society’s ills on the West…”I agree with this concept, not the hidden connotation.
Instead, The new administrative is blaming the trade deficit on China’s policy on“manipulating currency”.
RMB has appreciated roughly 20% to US Dollar in a short period. The investors can no longer bear the cost increase because of more and more expensive RMB, so a lot of them closed their factories in China and moved to Vietnam or elsewhere. The Chinese products are cheap, the main reason is not the exchange rate, but the low labor cost. China has advantage in labor –intensive products, such as garments, if each Chinese worker is paid as high as one half of that of the America’s worker, there might be no profit for exporters and the Chinese products won’t be cheap at all.
Some America merchants, such as Mcdonalds, Kenturky Fried Chicken, Wal-mart Stores has been very successful in China, the sale of America car is average, more Chinese people like to buy Japanese Honda or Toyota because of better service and less gasoline consumption. For high –tech products from USA, it is welcomed but subject to a lot of limitation.
Even from the point of purchasing power, the current exchange rate between RMB and USD is reasonable. Yes, the same Mcdonalds food is cheap in China paid in RMB, but what if we compare the price of real estate, It seems that it is cheap in USA paid in USD.

thmak Author Profile Page:

It is not that China does any wrong with regard to her trade practice. It is the free trade idea that USA has done to cause the collapse of the world economy. Everyone knows that to some extent USA control the world economy to her advantage and every one knows China is an economic, military and political adversary of USA for the past 50+ years. Similar to protecting herself from the political and military subjugating aggressiveness of USA toward China, China must also protect herself on the economic front against the ill-intent commercial approach from USA. It is not that the China currency is undervalued; It is the USA currency that is overvalued due to her recessive economy. The imbalance in trade is due to the fact that China produces merchandises USA wants to buy to keep herself in the high living standard while USA restricts China from buying what China wants and forces China to buy what China doesn't want.

hz9604 Author Profile Page:

If the US did not need to borrow from the Chinese, then China would be making cheap goods for us, we would be sending them dollars, and they could then sit on those dollars. The excessive borrowing of the U.S. is the problem Mr. Geithner and not China. And Mr. Geithner, I think we should review your record at the NY Fed to determine if you were part of the problem. I suspect you were.

Brian75 Author Profile Page:

If the point is to influence Chinese monetary policy, the aggressive approach will not yield results favorable to the US. The best that can be hoped for is moderate change over time through direct engagement on economic matters. It pains me to admit it, but the Bush admin and Paulson were right on this. Unfortunately, mouthpieces like Pelosi (and now Geithner) do not understand the best way to talk to the Chinese about these issues and because of that they will fail. I hope the PBoC is right in thinking that the Obama teams is doing little more than posturing. Bottom line: embarrassing the Chinese or aggressively pointing fingers WILL NOT yield results favorable to US interests.

juzsmart Author Profile Page:

Clearly the US is on the wrong side of history by trying to blame China currency on US trade woes. It aptly demonstrates that Obama is still wet behind the ears and fail to recognize that it is American conspicuous consumption and greed that created this problem. Each American spend 1.44 dollar for a dollar earned annually. The Chinese saved more than 0.40 dollar for each dollar earned. Americans have been consuming and spending beyond their means for many years. They have consumed a disproportionate amount of world resources relative to population. It is the biggest polluter of the environment and biggest manipulator of international finance. What they cannot reconcile on "real economy", they invent the "virtual economy" with derivatives and highly leveraged products. These product of "lies" is biting back at America through collapse of CDOs etc. and the greed of Wall Street continues with the Administration propping up insolvent banks. US handling of its financial houses is shameful and Obama should do well to clean his own house before assigning blame to others. Aside from China, nobody wants to buy a GM or Ford because they make such lousy cars. Most of Asia prefer Japanese cars. US needs to improve its products and services not currency to sell to the rest of the world. Blaming Chinese currency is worse than childish. It is irresponsible and dnagerous.

dahuanzhou Author Profile Page:

"Obama's inauguration was well-covered in the Chinese media. Of course, the censors were busy; they cut his reference to the fight against Communism and being on "the wrong side of history." But in general it was accurate, and even playful."
I compared several different translation from Chinese websites. I found only "communism" is omitted and replaced it with "****".I don't understand why communism is defamed as same thing like fascism. Besides, communism is the goal , not the reality. It seems frivolous to say that communism has been faced down when is it is not yet borne.
In today's world, some countries are led by communist party, but the countries are socialist countries. Following the globalization of world economy, more and more policy assimilation happened between different countries with different political system. Even the socialist countries can also adopt marketing economy.

I enjoy Obama's statement that "we have chosen hope for fear, unity of purpose over conflict and discord. "and "we can not help but believe that the old hatred shall someday pass; that the lines of tribe shall soon dissolve".

Aprogressiveindependent Author Profile Page:

The yuan appreciated about 20% to the dollar in just a few years. This change in Chinese currency is one of the reasons why thousands of factories closed, especially in Guangdong province, in China. Millions of people have lost their jobs.

Geithner and others in the Obama administration must be aware of these developments, but the drive to protectionism seems paramount to them. Higher interest rates, increased prices in this country and possible greater social instability in China are likely if the yuan appreciates as much as proponents of protectionism in the Obama administration seek. Are Mr. Geithner and others going to use an economic "clenched fist" against China? Not very smart economics or politics.

Glenderful Author Profile Page:

Pomfret is right: we don't have the means to tell the Chinese what to do on their monetary policy at this stage of the game. Currency manipulation is overblown anyway. It's not going to rescue the American economy.

crete Author Profile Page:

To West3 The RMB fell 23% against the Euro between March and Oct 2008 does that sound fixed to you? If the Chinese are artifically cheapening their currency that means that oil, iorn, cement, cotton and other raw materials that they import are over priced. The reason the RMB has not fallen against the US dolaar is that we let and infact aided the decline of the dollar. The US has been the one manipulating its currenty to make imports cheaper so that consumer could continue to spend not withstanding the declines in their real incomes. The EU and Japan should be taking action against the US rather than the US agianst China.

Indep_Observer Author Profile Page:

There have been several occurrences in the past where central governments have got together to either prop up or lower the US $ at the request of the US Treasury.
The USA had a fixed exchange rate up to the early 1970s and it was based on gold. President Nixon had to remove that link as there were too many Eurodollars sloshing around because of purchases of weaponry and supplies for the war on Vietnam.
In an ideal world it would be better for international commerce if currencies were fixed, i.e. hence the Euro for all the countries in the EU. Manufacturers and exporters would know what they get in local currency and not have to have their FX departments talking to the accounts and treasury departments. The same with importers who don't have to worry about their currency devaluing against a supplier's country if payment is required in the exporter's local currency terms. In either case most Chinese export goods contracts are quoted in US $ for the benefit of the importers.
Tim Geitner wants a strong dollar. The Chinese for their part have obliged in Yuan terms. You shouldn't be saying you want a strong dollar and then say that the Chinese currency is too weak. Other countries have tried to keep their currencies within a certain range of the US $ such as Japan and India and using the same tools. Recently when Japan decided that the losses on US Teasuries was too painful they stopped buying US Treasuries. As a result the Yen soared against the US $. Like any investment the Chinese are taking a risk holding such large amounts of US Treasuries. Tim Geitner should be thanking the Chinese, Japanese, Middle Eastern sovereign funds, etc for holding US Treasuries which keeps interest rates down in the US. Instead he is acting like an ungrateful large borrower who insults the bank manager who approved his loan. Besides, technically, the Chinese govt. can't be considered a currency manipulator i.e. you cannot manipulate anyone's currency exchanges, traders, etc if your currency is not freely traded.

jimtwest3 Author Profile Page:

While the U.S. dollar and other Western currencies fluctuate up and down with market forces, the Chinese currency is "fixed". The Chinese Communist Committee in Beijing "sets" the exchange rate of the Chinese currency. If you want to do business with China, the Chinese Communist Committee in Beijing tells what their exchange rate will be. The Chinese Communist party has set their exchange so low that their goods look very cheap. Chinese goods are not cheap, just their currency. By setting their exchange rate so low, other countries can not compete against China, so China dominates international trade. While the Chinese sell their goods cheap to the rest of the world and drive foreign factories out of business, the Chinese people can not afford to buy foreign goods because their currency has such a low exchange rate. Trade with China is NOT free trade. Trade with China is rigged trade, where only a few Chinese exporters and a few U.S. importers win. Everyone one else in the U.S. and China are badly hurt by China's policy. Since the Chinese Communist Party is not elected, it could care less what the Chinese people or people outside China think of their policy. This is the same Communist Chinese government that rolled their tanks into Tianan Square. The U.S. worker can compete with free trade. Chinese trade is nothing more than rigged corrupt trade system designed to benefit a few at the cost of many.
Cheap Chinese goods close factories thruout the world. By fixing the exchange rate, the Chinese Communist party have a trade system rigged where they are the only winners. Why compete with the U.S., when a few people in the U.S. are willing to sell out the U.S. for the right price. Hello Shoppers, Welcome.

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