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Obama Administration Delays Confrontation With China Over Currency

The Obama administration has decided to postpone issuing a report to Congress that would likely have labeled China a currency manipulator.  Treasury Secretary Timothy Geithner said in a statement the administration will instead focus on several upcoming U.S.-China meetings to pressure China to change its currency valuation policy.

The postponement of the report avoids an immediate and direct confrontation with China over its manipulation of its currency, the yuan.  China has pegged its value relative to a dollar at a rate that causes it to be as much as 40% undervalued.  This causes Chinese goods to be much cheaper on the global market and many U.S. lawmakers and economists point to it as a major cause of the United States’ trade deficit with China.

U.S. officials have long insisted that China allow its currency to float more freely on global currency exchanges so its value would be more reflective of actual market forces.  China has resisted easing its currency manipulation for years.

In the meantime, Treasury Secretary Geithner says delaying the report and pursuing the upcoming meetings among world financial officials “are the best avenue for advancing U.S. interests at this time.”

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