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Treasury Secretary Timothy F. Geithner said China’s exchange-rate policy is unfair to trading partners and the yuan is more undervalued than other emerging market currencies.
“It’s significantly undervalued, more so than is true of any major significant emerging-market currency,” Geithner said in a panel discussion in Palo Alto, California. “It’s unfair to all of China’s trading partners, Americans and others, because it just creates a playing field that’s unbalanced” and gives Chinese companies a “huge” short-term advantage, Geithner said.
Carbon Incentives
China’s incentives to encourage low-carbon generation such as solar and wind power are almost triple those in the U.S., according to the Climate Institute.
Measures to spur renewable energy, as well as taxes on dirtier forms of generation such as burning coal placed China above the U.S., Japan, Australia and South Korea in a six- country study and below only the U.K., according to the report, prepared for the Sydney-based institute by London-based analysts at Vivid Economics.
China, the biggest emitter, said last year it aims to cut carbon dioxide emissions per unit of gross domestic product by 40 percent to 45 percent from 2005 through 2020, when its target is to get 15 percent of its energy from renewable sources. The U.S and other countries are losing out to China in developing clean energy, Erwin Jackson, deputy chief executive officer of the Australian institute, said in a telephone interview.
Capital-Flood Caution
Capital flooding into Asia could lead to excessive exchange-rate moves, asset bubbles and financial instability, Dominique Strauss-Kahn, the head of the International Monetary Fund, said in Shanghai.
Some flows “can clearly be destabilizing,” Strauss-Kahn said in a speech distributed at a briefing after a conference sponsored by the IMF and co-hosted by the Chinese central bank.
Emerging economies have complained about near-zero interest rates in the U.S. leading to capital flooding their markets, while U.S. and European policy makers have criticized Asian governments for holding their currencies down to aid exports. Strauss-Kahn didn’t refer to the yuan, while John Lipsky, the IMF’s No. 2 official, welcomed China’s decision in June to allow more currency flexibility.