US hopes for more action from China on currency correction

The US administration has delayed its report on Yuan to Congress, holding back possible punitive action against China in recognition of steps to accelerate the Chinese currency appreciation, to the advantage of the American economy.

Treasury Secretary Timothy Geithner said that China has taken measures since early September to help its currency appreciate.

"If sustained over time, this would help correct what the IMF has concluded is a significantly undervalued currency," the US Treasury Department said.

Since June 19, when China announced its intent to reform its currency regime allowing the exchange rate to move in response to market forces, Yuan has appreciated by about three per cent against the US dollar, it said.

Since September 2, the pace of appreciation has accelerated to a rate of more than one per cent per month.

The Treasury said in the coming weeks, meetings between heads of State, finance ministers, and central bank governors of the G-20 and the Asia-Pacific region would provide an opportunity to progress balanced growth.

"The Treasury will delay the publication of the report on international economic and exchange rate policies in order to take advantage of the opportunity provided by these important meetings," it said.

By continuing to strengthen domestic demand and allowing the exchange rate to move higher to reflect fundamental economic forces, China will make a significant positive contribution to the global rebalancing effort,it said.

Currency reforms in China would also help reduce pressure on those emerging market economies that have more flexible exchange rates, and provide a level playing field for trading partners around the world, it said.

India is one of these emerging economies, which have allowed its currency to move largely according to market forces.

The US lawmakers are agitated over alleged currency manipulation by China, charging that it worked against the interest of American exporters. They want punitive action,such as increased tariff on imports from China.

The monthly US trade deficit surged in August, fueled by a record gap in trade with China and a weak overall showing for American exports.

The US imports of Chinese goods soared to $35.2 million from $33.2 billion in July. The US exports to China fell to $7.2 billion from $7.3 billion.

The overall US trade gap was $46 billion in August, up from $42 billion in July.

The US Treasury said it was a global challenge to build a stronger, more balanced and sustainable global economic recovery. The issue is multilateral and not limited to the US and China, it said.