Snow says China yuan flexibility helps free trade
STANFORD, Calif, Mar 4 (Reuters) China needs to speed up moves toward greater currency flexibility and open its financial sector to help resist calls for increased trade protectionism, U S Treasury Secretary John Snow said on Friday.
''China's impact on world markets now is very significant and with this increased role comes increased responsibility,'' Snow told a Stanford University conference. He said key trade partners had ''a shared responsibility'' to act to reduce global imbalances.
''The United States is doing its part,'' Snow said, adding that others must spur domestic demand and implying that Asia in particular needed to do more than simply stoke its exports.
''Appropriate response involves increased savings in the United States, raising domestic demand-led growth of our largest trading partners and greater exchange-rate flexibility in China and other large economies in emerging Asia to allow for gradual, market-based adjustments,'' Snow said.
The Bush administration has been pushing China for the past two years to let its yuan currency appreciate and is widely thought to be moving toward designating China a currency manipulator this spring unless Beijing speeds up its move.
''China has pledged to be flexible on the rate of the yuan, and they've made progress,'' Snow said. ''We need more progress, more flexibility.'' U.S. ANGER GROWING He warned: ''What lurks behind all of this...is if we don't get this relationship between China and the Unites States properly on the right course, protectionist sentiments in Congress are going to be difficult to restrain,'' Snow said.
Protectionist policies would undermine U.S. efforts to open markets throughout the world, he said.
Democratic Sen. Charles Schumer of New York and Republican Sen.
Lindsey Graham of South Carolina are threatening to reintroduce legislation that would impose tariffs up to 27.5 per cent in Chinese imports unless China revalues its yuan.
Asked about that proposal, Snow said it was misguided and would hinder efforts to promote freer trade. ''Legislation like that takes us the wrong way. The global economy does best when it emphasises open markets, free capital flows and letting market forces operate.'' Snow said China should reduce its ''heavy reliance on credit-fuelled investment and exports'' and said Beijing should open its financial sector to improve market efficiency.
The U.S. Treasury chief said he recognised that such action provoked debate within China but said it was necessary as China's trading might grows in global markets.
''We hope that debate...will see continuing progress on the side that says we can do better with greater flexibility, we can do better by opening up financial markets, we can do better by not over emphasising the export sector at the expense of the domestic sector,'' Snow said.
He said the Bush administration was committed to free trade and suggested that Beijing needed to demonstrate that it similarly accepted free trade in line with its responsibilities as a member of the World Trade Organization (WTO).
''China's responsibilities are to be a responsible WTO member, to live by the rules, to have trade be a two-way street, to address issues like counterfeiting and intellectual property rights,'' Snow said.
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