China/US: Cut the Crap and Just Fight Each Other

Now this is more like it in the "pot calling the kettle black" sweepstakes. China has now come out with an official response that takes great umbrage to just-installed US Treasury Secretary Timothy Geithner going along with the characterization of China as a "currency manipulator." From Reuters:

A Chinese central banker denounced accusations by U.S. Treasury Secretary-designate Timothy Geithner that China was manipulating its yuan currency, calling them misleading and warning against "excuses" for protectionism.

Su Ning, a vice governor of the People's Bank of China, called the comments by Geithner "out of keeping with the facts" and said they were "misleading in analysing the causes of the financial crisis," the official China News Service reported on Saturday. Su also warned against trade protectionism. "We believe that faced with the financial crisis there should be a spirit of self-criticism," Su said while visiting a business newspaper office in Beijing, according to the report. "The international community is currently working together in actively responding to the financial crisis, and it must avoid exploiting different excuses for renewing or encouraging trade protectionism," Su said, adding that such steps would harm global economic recovery.

Geithner's comments could signal that the new administration of President Barack Obama will take a tougher line against China in seeking to narrow China's big trade surplus, which some in Washington blame for stoking global economic imbalances. The yuan closed lower against the dollar on Friday and traded mostly below the Chinese central bank's mid-point, with speculation that Geithner's comments could spark a brief period of modest yuan depreciation.

To be fair to Geithner, I believe Brad Setser--who used to work under Geithner--when he says the Treasury chief is merely relaying his boss's opinion that China is a currency manipulator. Left to his own devices, Geithner would prefer a more conciliatory approach to economic diplomacy like The Great Paulsonio. The Financial Times adds more Chinese bellyaching, this time from the Commerce ministry instead of the PBoC. At this rate, virtually all trade and finance-related official functionaries will get a kick in:

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 renminbi. 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 [as imports for machinery and other capital goods fall faster than the PRC's goods exports].

Enough shadow boxing, I think it's high time we got some action from these antagonists. Frankly, I am getting tired of the bluster emanating from both. It's time they put the gloves on and got into the gladiator's arena known as power politics. Not only will be in a better place to figure out who calls the shots in the global political economy at this point in time, but we're likely better off if subprime globalization [1, 2, 3] is finished sooner rather than later. Here are my appeals to the belligerents -

President Obama, put your money where your mouth is at. Hit China hard with Section 301 legislation, ASAP. It will make you feel real good to punish these trade evildoers.

Chairman Hu, put your money where your mouth is at. Sell off some Treasuries to warn the US of its foolishness. You have Uncle Sam by the balls.