Maneuvers: Geithner Delays China Currency Report

What is Geithner playing at with the news that the US Treasury will delay the release of its report to Congress on the currency policies of US trading partners? The following was posted on the Treasury website just a few hours ago:

I have decided to delay publication of the report to Congress on the international economic and exchange rate policies of our major trading partners due on April 15. There are a series of very important high-level meetings over the next three months that will be critical to bringing about policies that will help create a stronger, more sustainable, and more balanced global economy. Those meetings include a G-20 Finance Ministers and Central Bank Governors meeting in Washington later this month, the Strategic and Economic Dialogue (S&ED) with China in May, and the G-20 Finance Ministers and Leaders meetings in June. I believe these meetings are the best avenue for advancing U.S. interests at this time.

As part of the overall effort to rebalance global demand and sustain growth at a high level, policy adjustments are needed that measurably strengthen domestic demand in some countries and boost saving in others. These are also important to ensure robust job growth. In the United States, private savings has increased, the current account deficit has fallen, and the President has outlined a series of measures to reduce our fiscal deficit.

Countries with large external surpluses and floating exchange rates, such as Germany and Japan, face the challenge of encouraging more robust growth of domestic demand. Surplus economies with inflexible exchange rates should contribute to high and sustained global growth and rebalancing by combining policy efforts to strengthen domestic demand with greater exchange rate flexibility.

This is especially true in China. China's strong fiscal and monetary response to the crisis enabled it to achieve economic growth of nearly 9 percent in 2009, contributing to global recovery. Now, however, China's continued maintenance of a currency peg has required increasingly large volumes of currency intervention. Additionally, China's inflexible exchange rate has made it difficult for other emerging market economies to let their currencies appreciate. A move by China to a more market-oriented exchange rate will make an essential contribution to global rebalancing.

Our objective is to use the opportunity presented by the G-20 and S&ED meetings with China to make material progress in the coming months.

This latest American strategy involves agitating for a strengthening of the RMB at a number of upcoming forums. Failure from the Chinese to act, however, might still set in the train of events that leads to it being labelled a manipulator (at long last):

However, another influential lawmaker, Representative Sander M. Levin, the chairman of the House Ways and Means Committee, endorsed the Treasury’s approach. “The announced delay is for a definite period and for a defined purpose,” Mr. Levin, Democrat of Michigan, said in a statement. But he added that if a multilateral effort did not result in China’s making significant changes, “the administration and Congress will have no choice but to take appropriate action.”

Similarly, Leo W. Gerard, president of the United Steelworkers, one of the largest manufacturing unions, said he was comforted by the Treasury stance. “Those are very positive statements,” he said. “We have an administration that’s finally talking about this issue. I’m not so bothered with the postponement if it’s going to bring about a positive direction and change in America.”

Wait and see, boys and girls, wait and see. Obviously, the US move allows a few months' worth of breathing space after Hu Jintao comes along for Obama's nuclear shindig, so don't take it for granted just yet that Geithner will wimp out for a third consecutive time on labelling China a manipulator. More so now, it may depend on what Beijing indicates in the upcoming economic meetings. Nevertheless, it's notable how even this usually token report is delayed in the interest of handling a particularly recalcitrant country from Washington's POV.