Obama says China's currency move 'a constructive step'
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U.S. President Barack Obama said China's decision Saturday to further reform its currency yuan exchange rate regime is a "constructive step."
"China's decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy," Obama said in a statement.
"I look forward to discussing these and other issues at the G20 Summit in Toronto next weekend."
The People's Bank of China, China's central bank, earlier on Saturday announced a decision to proceed further with the reform of the exchange rate regime to enhance the flexibility of the yuan, also known as renminbi (RMB)'s exchange rate.
U.S. Treasury Secretary Timothy Geithner on Saturday also welcomed China's decision to further reform its exchange rate mechanism.
"We welcome China's decision to increase the flexibility of its exchange rate," Geithner said. "Vigorous implementation would make a positive contribution to strong and balanced global growth. We look forward to continuing our work with China in the G20 and bilaterally to strengthen the recovery," he said.
In a recent Congress hearing, Geithner reaffirmed that China's yuan is a sovereign currency and the decision on reforming its exchange rate mechanism should be made by the Chinese government.
Geithner said a stronger RMB would benefit China because it would boost the purchasing power of households and encourage firms to shift to production for domestic demand, rather than for export.
He also noted that even though the RMB was held essentially fixed to the U.S. dollar over the past two years, China's currency appreciated by about nine percent against the weighted average of the currencies of its trading partners.
According to Geithner, the economic strengths of America and China are complementary.
In the first quarter of 2010, U.S. goods exports to China rose almost 50 percent compared to the same period the year before, while U.S. exports to the rest of the world have risen by less than 20 percent.
Geithner said that the United States and the American people " have benefited, and must continue to benefit, from strengthening our economic relationship" with China.
"We cannot afford to miss the opportunity that China's growth presents, not to shrink from the challenges it poses," he said.
