Geithner Lowers The Position Of RMB Exchange Rate In China'S Demand List

The prelude to China's president Hu Jintao's visit to the US is gradually beginning.

Beijing time January 12th evening, US Treasury Secretary

In response to our reporter's questions, Geithner admits that the severity of the RMB exchange rate dispute has been reduced due to China's high inflation rate.

"Taking into account the high inflation rate in China, the real appreciation rate of the RMB against the US dollar will be much higher than the average annual rate of 6%."

In the next few days, US Secretary of Commerce Luo Jiahui and Secretary of state Hilary will also make public speeches on Sino US relations.

The address of Geithner's speech was selected in the cradle of training diplomatic talents in the United States - University of International Relations, Johns Hopkins University.

The US Treasury secretary seems to be waking up to the next generation of diplomats in the United States: you need to focus on China. In 20 years, it will become an important power in the world, and even the fate of the United States will be closely linked with it.

Although the two big powers of China and the United States have not yet reached a consensus on many issues, the two countries have maintained consistency in the press release process of Hu Jintao's visit to the United States.

On the same day in Geithner's speech, Cui Tiankai, Vice Minister of foreign affairs in Beijing, told reporters at a press conference that China was worried about the security of its huge US Treasury bonds.

On the day before Geithner's speech, in January 11th, the Bank of China opened a pilot scheme for RMB trading in the United States, with a small business scope, but highlighted the important symbolic significance of RMB's internationalization.

A series of events show that the two sides are setting their keynote for Hu Jintao's visit to the US, and the final negotiations and game results are expected.

Setting the position of exchange rate issues

Geithner acknowledged the appreciation of the renminbi since 2010 and lowered the position of the RMB exchange rate on the list of us demands for China.

Geithner's speech, Pieter Bottelier, a senior part-time professor at Hopki college, commented Geithner's speech: he was pragmatic and concise in speech.

This time, Geithner did not speak hard on the RMB exchange rate. Instead, he reminded the audience to put the appreciation of the renminbi in the position of the US economic recovery and world economic development.

Many American politicians blame the US for their economic recession. The biggest sin is that the value of the renminbi is undervalued. They strongly advocate that the US government should take the interests of the national economy as the foundation and pressure the renminbi to appreciate.

The representatives of these people include ILO interest groups.

Because the ILO has been gaining momentum in the US politics today, this has created great pressure on China's exchange rate reform.

But the leaders of international institutions, including the International Monetary Fund, believe that the appreciation of the renminbi will not solve all problems.

Geithner's speech also tried to help Americans straighten out their understanding that the problem of the US economy is not in the renminbi itself.

Geithner believes that, in the final analysis, the recovery of the US economy should not rely on other countries, but rather on itself.

He endorsed the appreciation of the renminbi since 2010 and lowered the position of the RMB exchange rate on the list of us demands for China.

He still advocates the need for appreciation of the renminbi, but the tone is exhortation. "I believe that the Renminbi should be accelerated in the market under the premise that the market is expected to accelerate the pace of appreciation, in line with China's interests."

Geithner said.

In the Q & a session, a Japanese journalist asked Geithner whether he was satisfied with the current level of RMB appreciation. This is Geithner's good chance to further exert pressure on the RMB exchange rate, but he did not give a positive answer.

Behind this move, the US government has changed its understanding of the RMB exchange rate issue.

Since the outbreak of the US financial crisis, the RMB exchange rate has been tested by the domestic legislation and international political pressure.

The United States has tried to shift its responsibility to the question of the undervaluation of the RMB exchange rate. After the Democratic Party took charge of the White House, the domestic labor force will focus on the RMB exchange rate. The Obama administration has also mobilized other countries to jointly exert pressure on the renminbi.

In 2010, the RMB realized an annual appreciation of 6% under the difficult external environment. However, the US trade deficit with China did not rise or fall. The correlation between the RMB exchange rate and the US economy is not as close as some people have said.

Facts speak louder than words, and the international community has lost interest in American speeches. At the 2010 IMF annual meeting of the world bank, the RMB exchange rate has not even become a topic.

A week before Hu Jintao's visit to the United States, Obama met with French Prime Minister Sarkozy at the White House, the chairman and host of the 2011 G20 summit.

The leaders of the two western powers have divided their views on the next G20 agenda.

Sarkozy suggested that the dollar should be reduced in the international monetary system.

The legislation on the RMB exchange rate in the United States also failed because of lack of sufficient support.

At this point, the pressure on the RMB exchange rate has gradually eased, and the US government will concentrate more on other aspects that can effectively expand the interests of the United States in China.

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China and the United States demand confrontation

Botelli believes that the US government is more wise to seek market access and intellectual property protection than to pursue RMB appreciation at this time.

The position of the exchange rate issue is no longer the top. What are the demands of the US side for China? Geithner pointed out straightforwardly: I hope to master more Chinese markets and guide China's economy to reduce its dependence on exports.

Under these two principles, Geithner put forward four demands for China: the government should reduce subsidies to Chinese enterprises, make the market competition environment fairer, China strengthen intellectual property protection, and pform the economic growth structure through expanding education and medical expenses.

Botelli, a senior part-time professor at Hopki college, believes that the US government is more wise to seek market access and intellectual property protection at this time than to pursue RMB appreciation.

"Over the past 2 years, the business community has felt that China's trade protection has increased significantly. The exchange rate of RMB against the US is certainly an important issue, but other issues are more urgent."

In the final analysis, it depends on who affects the RMB exchange rate in the United States.

If China does not increase its exchange rate, it will only suffer from some small exporters in the US, because their products are not internationally competitive, but if China does not let go of the market, the large number of big American enterprises will suffer a great deal, and this will be a bigger blow to the US.

Moreover, even Geithner believes that the appreciation of the renminbi is inevitable. China's inflation this year indirectly pushed up the real exchange rate of the renminbi.

Botelli estimated that the value of the RMB against the US dollar actually appreciated more than 7% last year.

China also has its own aspirations.

Cui Tiankai, Vice Minister of foreign affairs of China, said at a news conference in January 12th that China is concerned about the security of investment in the United States and will welcome the positive remarks made by the United States on the safety of these investments.

China is the largest creditor country in the United States.

Cui Tiankai also said that rare earth should not be a problem between the United States and China. China's rare earth reserves account for only 1/3 of the world's total.

At present, a widely held view in the United States is that the poor economy of the United States is China's fault. Therefore, the United States must make China correct when it gets better.

Geithner did not support this view.

"Americans must understand that no matter what we say about China, the problem of the United States depends on Washington first, rather than Beijing."

While answering reporters' questions, Cui Tiankai made no mention of differences and frictions between the two countries.

He said that no matter the problems arising from national differences or the friction and differences encountered in the development of relations, they should be treated and handled in the spirit of mutual respect and mutual trust.

"This spirit can also be fully reflected in President Hu Jintao's visit to Nonaka."

Cui Tiankai said.