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Paulson To Prod China on Currency

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David Cho and Ariana Eunjung Cha
Washington Post
Wednesday, Dec 03, 2008

Treasury Secretary Henry M. Paulson Jr. will urge China to maintain a strong currency during high-level talks this week as worries grow in the United States that Beijing may be exacerbating the global slowdown by deflating the value of the yuan to spur its own economy, Treasury officials said yesterday.

China’s exports have slowed as consumers in the West rein in spending and currencies of other Asian nations plummet because of financial turmoil at home, making those countries’ goods cheaper on world markets. In recent days, the yuan neared five-month lows, prompting some U.S. economists to speculate that China is trying to keep its currency in step with its Asian competitors.

These economists say they worry that a devalued yuan would discourage ordinary Chinese from spending, reducing economic activity and thus contributing to the global slowdown.


In a speech yesterday ahead of his trip to Beijing, Paulson called on China to show “bold leadership” in its efforts to open its economy. “Continued reform of China’s exchange rate policies is an integral part of this broader reform,” he said. He cited the yuan’s 20 percent appreciation since 2005 but added that more needed to be done.

“What is thought to be happening is that China is artificially weakening the yuan going into the meeting with Paulson,” said Kathy Lien, director of currency research at GFT, a global currency brokerage in New York. “China wants a weak yuan, growth is beginning to slow and they are seeing weakening external and internal demand.”

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This article was posted: Wednesday, December 3, 2008 at 11:58 am

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