Tim Geithner, the US Treasury Secretary, emerged from a surprise meeting with the Chinese vice-premier, Wang Qishan, yesterday tight-lipped about whether China was ready to announce a revaluation of its currency.
News of the meeting excited hopes of a deal that would ease one of the biggest sources of economic tension between the two countries, namely the value of the Chinese renminbi.
Politicians in the US are angry that the Communist regime has pegged the value of the renminbi against the dollar at what they say is a seriously undervalued level. By doing so, China is artificially stimulating its exports to the US, they say, and there has been growing pressure on Mr Geithner to formally designate China as a currency "manipulator" – a move which would trigger economic reprisals.
Reports suggest that Treasury officials are optimistic that the Chinese will relax their position, even though yesterday's meeting did not result in any statement about the renminbi. "The two sides exchanged views on US-China economic relations and the global economic situation," the Treasury department said in a brief statement.
Yesterday's 75-minute meeting in the VIP lounge of Beijing International Airport came just a few days before Chinese President Hu Jintao's scheduled visit to Washington for a nuclear security summit on 12 April.
Mr Geithner had been on an official visit to India, and the Chinese suggested that he stop in Beijing on his return to the US. Over the weekend, the Treasury Secretary delayed a decision on whether to designate China a currency manipulator. Continued high unemployment in the US and the trade deficit with China have been adding to pressure on the Obama administration to make a ruling.
There were additional signals from China that the authorities are close to announcing a change of policy on the renminbi. Xia Bin, monetary policy adviser to the central bank, said the fixed exchange rate introduced during the credit crisis was no longer necessary, although he insisted that a sudden upward revaluation would cause too much economic disruption to countenance.
Treasury officials believe that China could announce a modest revaluation, together with a managed exchange rate policy of allowing the renminbi to float in a much wider range than used to be possible.Reuse content