Rags to Riches

[BlackThought]

German minister hits out at US over China forex criticism

German Economy Minister Rainer Bruederle said Wednesday US criticism of China's forex policy was largely due to the fact that Washington "had not managed to control their problems" with competitiveness.

The United States, which accuses China of undervaluing its currency to stimulate its exports, "are on the eve of elections, and have not managed to master their own problems," the minister said during a visit to China.

He said this accounted for the US position in in the argument, which dominated debate at the International Monetary Fund meeting in Washington at the weekend.

US Treasury Secretary Timothy Geithner had said the IMF should play a stronger role in surveillance of the global financial system, in comments apparently aimed at China.

The US Congress has moved to slap retaliatory sanctions on Chinese goods and Washington has ratcheted up the pressure by hinting that China may not be allowed a bigger say at the IMF unless the currency issue is resolved.

"Many of the arguments leave one thinking that the yuan is undervalued," Bruederle conceded -- in particular the massive forex reserves accumulated by China.

However, he said, "I advise our (American) friends to spare no effort" to reduce their trade deficit and improve the competitiveness of their economy.

"My concern is that they are favouring short-term solutions for electoral and partisan reasons," he added, in reference to upcoming mid-term US elections in November.

Germany was not as swift as other countries to point the finger at China in the "exchange rate war" which has seen the central banks of various countries intervene to weaken their currencies.

The problem "plays a lesser role for the German economy than for others," Bruederle said, as German products are widely in demand and less sensitive to pricing than others.

The vigorous revival of the German economy owes much to its exports to Asia, notably China. Trade between the two countries should reach 100 billion euros this year, according to the minister.

Berlin also sided with China in solidarity since Germany was also accused, in particular by the United States, of favouring exports at the expense of its partners.

"At the moment I have more criticism of the American Treasury secretary than of China," Bruederle said.

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