China hits back over renminbi comments

By Geoff Dyer in Beijing

The US and China have embarked on a public row over foreign exchange policy only three days after Barack Obama’s inauguration, with China denying on Friday night it was “manipulating” its currency and saying the allegation would only fan protectionist sentiment in the US.

The Chinese government was responding to claims by Tim Geithner, President Obama’s choice for Treasury secretary, who told a Senate nomination hearing on Thursday that China was “manipulating” the renmnbi.

Mr Geithner’s blunt tone appeared to indicate a more confrontational approach towards China on economic issues.

In a statement on Friday night, China’s commerce ministry said Beijing “has never used so-called currency manipulation to gain benefits in its international trade”, AFP, the news agency, reported. “Directing unsubstantiated criticism at China on the exchange-rate issue will only help US protectionism and will not help towards a real solution to the issue.”

The pointed comments between the two governments will exacerbate concerns of a surge in trade and currency disputes as a result of the slump in the global economy.

Mr Geithner’s comments were also criticised in strong terms by prominent academics in China. “This is a sign of his immaturity and his inability to do such an important job,” said Shen Dingli, professor of American studies at Fudan University.

China’s currency has appreciated 19 per cent since Beijing abandoned a dollar peg in 2005, but record trade surpluses over the past three months give ammunition to those who argue the renminbi is still undervalued.