Nations see dip of dollar as threat to economies

By Patrice Hill-The Washington Times

While the United States has been fussing at China for gaining an advantage in trade by depressing the value of its currency, other nations — while agreeing about China — are increasingly focused on the falling dollar and concern that the U.S. may be doing the same thing.

Treasury Secretary Timothy F. Geithner on Wednesday stepped up U.S. demands that China stop closely controlling the value of its currency and allow it to rise against the dollar, suggesting that the Asian giant may be violating its pledge last year to move toward freer exchange rates with other Group of 20 economic powers.

“We have moved aggressively to do our part to help bring the world out of crisis,” said Mr. Geithner, noting Congress‘ enactment of strict new regulatory reforms on Wall Street this summer, and a big drop in the U.S. trade deficit since 2008 as a result of greater savings and less spending by U.S. consumers.

While not mentioning China specifically in his speech to the Brookings Institution, Mr. Geithner pointed to what he described as other “major economies” with chronic large trade surpluses and undervalued currencies, in an unmistakable reference to the Asian giant.

European nations echoed Mr. Geithner‘s criticism in a separate forum with Chinese Premier Wen Jiabao in Brussels, and called on China to allow more rapid appreciation of its currency, the yuan or renminbi. That prompted a strong rebuke from the Chinese leader.

“Do not work to pressurize us on the renminbi rate,” he said. “Yes, we are going to proceed with the reforms,” but he suggested the bigger problem for the world economy was the recent large drop in the U.S. dollar, which is the world’s main reserve currency.

Mr. Wen warned of dire consequences if China were to abandon its gradual currency reform and allow a rapid rise of the yuan.

“Many of our exporting companies would have to close down, migrant workers would have to return to their villages,” he said. “If China saw social and economic turbulence, that would be a disaster for the world.”

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