China: Currency Compromise Coming?
Treasury Secretary Timothy F. Geithner plans to hold talks with Chinese Premier Wang Qishan on Thursday. While in India, Geithner declined to give an official agenda for his visit, but hopes abound that a compromise of the valuation of the yuan can be reached. Currently, the rate of the renminbi to the dollar is 6.82, an number which according to analysts, could be 40% below the its actual value. The peg allows China to keep its products artificially low in the world market, but many Chinese policymakers (not to mention American ones) have noted that a rise in the yuan would help consumer purchasing power and control inflation. Wang apparently believes in these arguments, as negotiations between him and former Treasury Secretary Henry M. Paulson Jr. allowed China’s currency to rise 21% between 2005-2008.