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Averting a currency war

Business Times - 14 Apr 2010


Averting a currency war

NEWS reports from Beijing suggest that China may be on the brink of allowing the value of its currency to rise, perhaps by as much as 3 per cent against the US dollar. While a 3 per cent change is relatively small, a deal between Chinese and US officials on boosting the value of China's currency could have important economic and political implications for both the United States and China as well as for the global economy. The expected Chinese currency re-evaluation followed a visit to China by US Treasury Secretary Timothy Geithner last week, a few days before Chinese President Hu Jintao's arrival in Washington on Monday.

One important outcome of a Chinese currency adjustment against the US dollar would be political. It would turn the currency question from a hot-button issue into a manageable problem in Washington. This could help ease pressure on the Obama administration from lawmakers to name China a 'currency manipulat…