The Chinese news agency is accusing Lew of “fact-twisting and politically misleading remarks.”
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Treasury Secretary Jack Lew, who is planning to attend the U.S.- China Strategic and Economic Dialogue (S&ED) conference that started on Tuesday in Beijing, has been accusing the Chinese government of engaging currency manipulator, stopping just short of actually using this explosive term.
Lew, who is in Beijing with Secretary of State John Kerry, has joined other Treasury officials in saying the Chinese yuan is undervalued, and that Chinese officials must liberalize the currency, mostly by leaving it alone.
Obviously, an undervalued yuan means cheap Chinese products can sail easily into Western markets, while the nice Chinese people who make those products cannot afford to treat themselves to American goods in return.
An editorial in China’s state-run Xinhua News Agency has not minced words on Tuesday, accusing the Secretary of the Treasury of coming to Beijing in bad faith.
“Before the curtain is raised, some on the U.S. side already poured cold water on the talks, ” said an agency editorial, headlined “China’s currency policy no political tool for U.S.” It accused Lew of “fact-twisting and politically misleading remarks.”
Axel G. Merk, president and chief information officer of Merk Investments, suggested in an email that “accusations for currency manipulation are misplaced, ” stating that China’s State Administration for Foreign Exchange [SAFE] “has taken very prudent steps to get the currency to be a major, free floating currency.”
Merk added: “Moving a huge economy to a free float is no small undertaking.”
International Business Times pointed out Tuesday that the yuan had gained in value for the third straight day, as China’s state-run central bank boosted the currency’s fixing ahead of the meeting. The People’s Bank of China raised the reference rate by 0.05 percent, to 6.1626 to the dollar.
“It seems as if China is finally heeding calls to allow for a market-determined currency, ” commented IBT’s Michelle FlorCruz.
US politicians, especially during the 2012 presidential campaign, have been pointing fingers at the Chinese government’s control over the currency exchange rate. Republican candidate Mitt Romney promised to add China to the list of currency manipulators, something successive Treasury reports have preferred to avoid.
Over the past three weeks, the yuan has been climbing against the US dollar, but this is not necessarily a trend, but yet another government manipulation, except this time in the opposite direction, in anticipation of the high level S&ED conference this week.
Secretary Lew will have to combine carrots and sticks this week, to convince his Chinese hosts to love their yuan enough to let it go.
And, obviously, everybody at the conference is aware of the fact that China’s holding of US government debt is at an all-time record of just under $1.5 trillion.
Secretary of the Treasury Jack Lew, 57, is the highest-ranking Orthodox Jew in the history of the US government. His father was a lawyer and rare-book dealer who came to the United States from Poland as a child.