OP-ED: U.S. Ups Ante with China (Globe and Mail, CANADA)

The Obama administration is showing a prompt and welcome boldness in trying to bring greater balance to the economic relationship between China and the United States. The Beijing government should heed what amounts to a call to let the value of the Chinese currency rise, which would increase the Chinese people's purchasing power.

In a letter this week to the Senate finance committee, answering senators' questions, Timothy Geithner, the treasury secretary-designate of the U.S., attributed to President Barack Obama himself the view that China is manipulating its currency.

Though the Bush administration had tried to persuade Beijing to raise the exchange rate of the Chinese yuan, it had refrained from using the verb “manipulate.” China yielded to a considerable extent, but the ascent of the yuan to what would be its true market level has since halted.

There can be no doubt that, by its large purchases over the years of U.S. treasury bills and other U.S.-dollar-denominated securities, Beijing has kept up the value of the American dollar and correspondingly made Chinese exports cheap. In effect, the undervalued yuan has been an export subsidy. Retailers such as Wal-Mart have benefited, but U.S. manufacturers have suffered, and it has been all too easy for U.S. federal budget deficits to accumulate.

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