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Geithner Refuses To Call China Currency Manipulator, Also Refuses To Stop Complaining

Tyler Durden's picture


Our administration in a nutshell: in the just released "Semiannual Report on International Economic and Exchange Rate Policies" by the Treasury, the conclusion is that while China isn't really a currency manipulator, which it obviously is via the CNYUSD peg, inasmuch as the US also is courtesy of the Hewlett Vissarionovich, "progress thus far is insufficient and that more rapid progress is needed." Win win for everyone, as the global FX attrition war continues (we lob inflation at them, they lob it back ten fold). In the meantime, the status quo is great and let's all pray that the global revolutions end with Egypt, which a month ago few even could point out on a map.

The salient section exposing just how pragmatic our fearless leaders are... and who has all the leverage.

With respect to exchange rate policies, ten economies were reviewed in this Report, accounting for nearly three-fourths of U.S. trade. Many of the economies have fully flexible exchange rates. A few have more tightly managed exchange rates, with varying degrees of management. This report highlights the need for greater exchange rate flexibility, most notably by China, but also in other economies.

In China, the authorities decided in June 2010 to once again allow the exchange rate to appreciate in response to market forces. Since the June announcement, the renminbi (RMB) has appreciated by a total of 3.7 percent against the dollar as of January 27, or at a rate of approximately six percent per year in nominal terms. Because inflation in China is significantly higher than it is in the United States (in the second half of 2010, the annual rate of CPI inflation was more than 5 percentage points higher in China than in the United States), the RMB has been appreciating more rapidly against the dollar on a real, inflation-adjusted basis, at a rate which if sustained would amount to more than 10 percent per year. China is also undertaking a relaxation of restrictions on the use of the RMB. These reforms will gradually erode the controls that help the authorities manage the level of the exchange rate, and over time will contribute to a more market-determined exchange rate.

China’s continued rapid pace of foreign reserve accumulation and the huge flow of capital from the Chinese public to advanced countries that it implies, the essentially unchanged level of China’s real effective exchange rate especially given rapid productivity growth in the traded goods sector, and widening of current account surpluses, all indicate that the renminbi remains substantially undervalued. It is in China’s interest to allow the nominal exchange rate to appreciate more rapidly, both against the dollar and against the currencies of its other major trading partners. If it does not, China will face the risk of more rapid inflation, excessively rapid expansion of domestic credit, and upward pressure on property and equity prices, all of which could threaten future economic growth. By trying to limit the pace of appreciation, China’s exchange rate policy is also working against its broad strategy to strengthen domestic demand. And China’s gradualist approach on the exchange rate also adds to the substantial pressure now being experienced by other emerging economies that run more flexible exchange rate systems and that have already seen substantial exchange rate appreciation.

Many in China recognize that China is too large relative to the world economy for it to continue to rely on foreign demand to grow. They also recognize that exchange rate flexibility needs to be part of China’s efforts to change its pattern of growth. During President Hu’s state visit to the United States in January 2011, China committed in a joint statement of Presidents Obama and Hu that “China will continue to promote RMB exchange rate reform and enhance RMB exchange rate flexibility, and promote the transformation of its economic development model.”

Based on the resumption of exchange rate flexibility last June and the acceleration of the pace of real bilateral appreciation over the past few months, and in view of the commitment during President Hu’s visit that China will intensify its efforts to expand domestic demand and further enhance exchange rate flexibility, Treasury has concluded that the standards identified in Section 3004 of the Act during the period covered in this Report have not been met with respect to China. Treasury’s view, however, is that progress thus far is insufficient and that more rapid progress is needed. Treasury will continue to closely monitor the pace of appreciation of the RMB by China.

Next up, Chuck Schumer to do a repeat of the whole very loud song and dance, which will also achieve absolutely nothing.

Full report (pdf):



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Fri, 02/04/2011 - 17:23 | Link to Comment Yen Cross
Yen Cross's picture

Thanks Tyler. You just reminded me South Park is coming on soon.

Fri, 02/04/2011 - 17:28 | Link to Comment gloomboomdoom
gloomboomdoom's picture

huh? Netflix has it for free. People don't download things illegal anymore. Everyone is totally honest and transparent.

The economy is all realitive

Fri, 02/04/2011 - 17:27 | Link to Comment Twindrives
Twindrives's picture

Geithner is China's butt boy.

Fri, 02/04/2011 - 23:35 | Link to Comment bigdumbnugly
bigdumbnugly's picture

that's because he sees eye to eye with them.  they can spin Timma  around and have their way with him without straining on tiptoes.

Fri, 02/04/2011 - 17:29 | Link to Comment Mad Max
Mad Max's picture

It seems that our export of inflation is our version of Montezuma's Revenge for China.

They are exporting crap to us and destroying our industrial base (with plenty of help from CEO traitors here) but they don't seem to be exporting inflation to any significant fraction of that which we're sending toward them.

Fri, 02/04/2011 - 17:33 | Link to Comment Yen Cross
Yen Cross's picture

Really you mean. Export of wealth,technology, creativeness,skill, and Most importantly. Respect!

Fri, 02/04/2011 - 17:48 | Link to Comment johny2
johny2's picture

Good point, though I would rate skill, creativeness and technology much above respect. Wealth is more or less preserved in the treasure vaults of the 1 % of population.

Fri, 02/04/2011 - 17:54 | Link to Comment Yen Cross
Yen Cross's picture

Wealth isn't bought or sold. It's earned! I understand your point though.

Fri, 02/04/2011 - 18:38 | Link to Comment Calmyourself
Calmyourself's picture

Increasingly it is created by government fiat, witness the exemptions to the bamsters health care fiasco and GE's timely exemption from greenhouse gas emissions for its nat gas turbines in California.

Sat, 02/05/2011 - 01:46 | Link to Comment Stimulus Billy
Stimulus Billy's picture

Disagree.  China' demand for fuel and food can't be helping with my (not the Fed's) inflation problem.

Fri, 02/04/2011 - 17:29 | Link to Comment weinerdog43
weinerdog43's picture

Timmy needs to shut up and start working on his taxes.  Oh...wait...  Never mind.

Fri, 02/04/2011 - 17:32 | Link to Comment Miles Kendig
Miles Kendig's picture

Obama continues Bush policy.  Renounces the long standing policy & numerous treaties of no first use of WMD as American Administrations unleash the Federal Reserve, Treasury Department, the Courts & the TBTF upon the world, spawning ever growing cycles of social, political & economic instability.

Fri, 02/04/2011 - 17:33 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

David Stockman, former Reagan OMB director, "We are not heading for a cliff, we are heading for a wall."

Fri, 02/04/2011 - 17:34 | Link to Comment Miles Kendig
Miles Kendig's picture

As David Stockman seeks to channel his inner George Wallace and find redemption as his life nears its end.

Fri, 02/04/2011 - 17:33 | Link to Comment TorchFire
TorchFire's picture


Progress, we are marching backward
Progress, as the captains of our fate
Progress, as we spiral downward
Progress, we defile and we desecrate

Soon controlling all conceivable solutions near you...

Fri, 02/04/2011 - 17:33 | Link to Comment RobotTrader
RobotTrader's picture

Joe Six could care less about the whole currency manipulation issue.

Right now, the only things they care about are:

1) Who is going to win the Super Bowl?  Is there going to be a lockout in the NFL next year?

2) What is going to happen next on American Idol or Jersey Shore?

3) When is Kim Kardashian going to come out with a weight loss pill?

4) How am I going to get my iPhone through Verizon if they are sold out?

5) When will NFLX start streaming porn?

6) Who is going to Bike Week in Daytona this year?

7) How can I score as many hookers and coke as Charlie Sheen?

8) When is Charlie Sheen going to be on Celebrity Rehab with Dr. Drew?

9) When are the snowstorms going to stop, so I can go back outside and go shopping?

10)  When are the credit card companies going to start offering 2.9% forever balance transfers without the 3% fee?


Notice that nobody is talking about stocks.  They could care less.

Anyway, you get the picture....


Fri, 02/04/2011 - 17:38 | Link to Comment Miles Kendig
Miles Kendig's picture

How can I score as many hookers & coke as Charlie Sheen?

Heck Robo, Charlie Sheen isn't representing Joe Six with that.  He is representing Wall Street & political elites with that one ....  How else do you think that wealth effect is finding its way to Main Street?

Fri, 02/04/2011 - 17:53 | Link to Comment Max Hunter
Max Hunter's picture

Robo.. that's the most honest and accurate op ed you've done to date... + XLV

Fri, 02/04/2011 - 19:47 | Link to Comment cbxer55
cbxer55's picture

Me Oklahoma Joe Sixpack.

1) Cannot stand football.

2) American Idol? Jersey Shore?

3) Who is Kim Karwhateverhernameis?

4) Don't have iphone, nor do I want one.

5) Don't do nflx. Heard of Red Tube? Rate My Naughty?  ;-)

6) Too far from Oklahoma for this biker. Could care less who else goes.

7) Not into hookers or coke, charlie sheen can go fuck himself.

8) When he gets his head out of his ass, the asshat.

9) When are the snow storms gonna stop, so I can go back to work?

10) No credit cards now, nor anytime in the future.

Fri, 02/04/2011 - 21:31 | Link to Comment snowball777
snowball777's picture

1a) Packers (because it would be sweet to watch Brett cry).

1b) Who cares? Parity killed the game.

2) Never watched either...I hear they're like Wild Kingdom, but with more make-up.

3) Please let it be cyanide capsules.

4) Jailbrizzeak, bitchez.

5) Well ahead of their competitors.

6) If ain't Fogarty, it ain't bike racing.

7) Make as much money as Charlie Sheen.

8) When he loses his contract for Two Tards and an emancipated minor.

9) n/a (sunny and clear in CA...much to my sister in Albany's angst).

10)  n/a Don't have a CC balance.

Anything else, Robo?

Fri, 02/04/2011 - 17:35 | Link to Comment topcallingtroll
topcallingtroll's picture

China you are not a currency manipulator, but would you please stop manipulating? Pretty please? Timmah will be your best friend.

Fri, 02/04/2011 - 17:36 | Link to Comment DonnieD
DonnieD's picture

I'd name the US a Currency Manipulator, China an Exporter of Lead Filled Shit, India a Job Stealer and Egypt a Glimpse of the Future.

Fri, 02/04/2011 - 17:41 | Link to Comment Head for the Hills
Head for the Hills's picture



Who's your currency manipulator now???

Who's your daddy....

Fri, 02/04/2011 - 17:40 | Link to Comment Pure Evil
Pure Evil's picture

I don't think we have to wait to get a glimpse of the future. Just travel to Detroit, Camden/Newark/JerseyCity New Jersey, upstate New York, Liberty City FL, New Orleans LA, Los Angles CA. The only thing we're lacking are the riots.

Fri, 02/04/2011 - 17:47 | Link to Comment DonnieD
DonnieD's picture

We still need Obama holed up in the White House behind a chain link fence and protected by the military sending ACORN and SEIU thugs to beat down the common man looking to cash in on his promise for "change".

Fri, 02/04/2011 - 17:41 | Link to Comment downwiththebanks
downwiththebanks's picture

How is pegging a currency 'manipulation'?  

In a cartel-controlled faux-market, isn't a peg just about the only rational action for a government to take?

Fri, 02/04/2011 - 17:55 | Link to Comment johny2
johny2's picture

Another good post and reminder to me why I read the ZH...Some of the best insights are in the comments section.

Fri, 02/04/2011 - 18:14 | Link to Comment Logans_Run
Logans_Run's picture

Well when you are pegged to a known currency manipulator (US), aren't you by default a currency manipulator as well?

Sat, 02/05/2011 - 06:02 | Link to Comment AnAnonymous
AnAnonymous's picture

Maybe. But stopping the 'peggers' from 'pegging' does not stop the currency manipulation. Only stopping the currency manipulator from manipulating does.

Once again, 'wrong' targeting by the US.

Fri, 02/04/2011 - 20:41 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

The SPX will be pegged to 1750 or thereabouts ... (Nicolas Colas).

Fri, 02/04/2011 - 17:42 | Link to Comment buzzsaw99
buzzsaw99's picture

pencil neck

Fri, 02/04/2011 - 17:43 | Link to Comment Notimpossible
Notimpossible's picture

That explains why bond yields were rising...don't play chicken with China. Big bond reversal coming next week.

Fri, 02/04/2011 - 17:45 | Link to Comment Yen Cross
Yen Cross's picture

China doesn't manipulate. They (PBoC) dominate and own. Look @ Africa and rare earth trades. Look @ the control and stock piling of all resources. Wake up people. Expansionist policies. Take down wealth, and buy everything in the process.

Fri, 02/04/2011 - 18:00 | Link to Comment sergeyvz
sergeyvz's picture

> Egypt, which a month ago few even could point out on a map

That's funny, but recently Fox News showed a map where Iraq was named Egypt :)))

Fri, 02/04/2011 - 19:20 | Link to Comment mynhair
mynhair's picture

Geez, it was showing how stupid the Lib Lamestream media is:  was from a couple of years ago on MSLSD.

You Libs are soooo gullible.

Sat, 02/05/2011 - 02:39 | Link to Comment weinerdog43
weinerdog43's picture

Ha!  You nazis have fallen for it over and over again.  Try to keep up.  Rush & and Beck will be on again for more talking points dickwad.

Fri, 02/04/2011 - 17:50 | Link to Comment Tense INDIAN
Tense INDIAN's picture

Ur Gary Locke  wants us to open up.......they also wanted us to sign the climate treaty...


i m so glad India has not .....

Sat, 02/05/2011 - 10:31 | Link to Comment Hephasteus
Hephasteus's picture

India is strong. We sent the hilary in and you destroyed her.

Fri, 02/04/2011 - 18:04 | Link to Comment Yen Cross
Yen Cross's picture

Are Chinese (YUAN) bonds freely traded in equity markets? NO

Fri, 02/04/2011 - 20:20 | Link to Comment desgust
desgust's picture

Geithner is history. Dimon is waiting in the wings:

Special report from reuters/red shield

"Jamie Dimon wants R.E.S.P.E.C.T"

My ass!!!


Fri, 02/04/2011 - 20:27 | Link to Comment trav7777
trav7777's picture

yuan is trash.  China is trash.  Fraud and pollution everywhere the eye can see, even the "Idiot Abroad" thinks China is dogshit.  The capper was when he had to shit in a hole and there is no TP in the public restroom

Fri, 02/04/2011 - 23:43 | Link to Comment bigdumbnugly
bigdumbnugly's picture

don't tell me had had to leave 111's on the wall...?...

that would be a little too hard core for that show, no?

Fri, 02/04/2011 - 20:40 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

To label China a manipulator would be an official slap in the face. Why would you slap the face of the guy you want to sell seemingly infinite stuff to? Especially in a place where face is everything. Mad Men, meet the Face. Both of you have a lot in common.

The dream is alive and kicking. Apple is not in Shanghai just for cheap labor. An iPad in every house and two iPhones in every pot, times 600MM.

At the same time, as the great TIM says, you can let the RMB float up, or "If it does not, China will face the risk of more rapid inflation, excessively rapid expansion of domestic credit, and upward pressure on property and equity prices, all of which could threaten future economic growth."

I am an enchanter ... There are some who call me ... Tim ?

Fri, 02/04/2011 - 22:12 | Link to Comment waterdog
waterdog's picture

Egypt, that's in Africa isn't it?

Green Bay by 7


Fri, 02/04/2011 - 23:44 | Link to Comment huckman
huckman's picture

I thought it was all about inflation in China to un-peg the currencies:

Sat, 02/05/2011 - 10:35 | Link to Comment Hephasteus
Hephasteus's picture

I think it's more about punishing the world for criminal interference of the fed's business model. I think they call it All your wealth are belong to us.

Sat, 02/05/2011 - 21:39 | Link to Comment ThirdCoastSurfer
ThirdCoastSurfer's picture

Feb 3rd, 2011

"The fire quickly spread to Tower A, a 219-meter (719 feet) tall building that houses a five-star hotel, the state-run Xinhua news agency reported....It said personnel from the nearby Sheraton Shenyang Lido Hotel were evacuated, but nearby residents were able to stay home."

Reading between the lines, how does one not come to the conclusion that during the peak holiday season in Shenyang, both Tower A and the Sheraton were largely if not completely vacant if only "personnel" were evacuated. 

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