Geithner and US Senate perform the "Good Cop/Bad Cop" Routine on China regarding Yuan appreciation

China has again come under increasing pressure from the US to appreciate the yuan against the US Dollar removing the hard peg it has against the Dollar.The US Senate is also piling up the pressure against the Chinese by proposing sanctions such as import duties on Chinese imports.While the US Government had delayed any potential action against China in May when there was speculation that the Treasury might deem China as a “currency manipulator”,the US Senate has decided to take over as the “Bad Cop” routine.Timothy Giethner as the “Good Cop” has failed to get tangible results with China not committing to any yuan appreciation deadline.Note China exports in May came far ahead of consensus but it faces potentially huge problems.The Euro has depreciated almost 20% from the peak against the Dollar and the Yuan.This has created huge problems for Export oriented Chinese Manufacturing sector with the European Union being the biggest Market for Chinese Exports.Also Wages in China are increasing with Labor Unrest increasing in the Coastal regions.Given these problems I had thought that China might have Depreciated their Currency.The last few months have seen a lot of posturing between top officials of both countries without any results.There have also been some tit for tat small Dumping cases against each other.A major Trade Dispute between the two countries would be catastrophic for the whole world economy.

Geithner Says China Yuan Policy ‘Impediment’ to Global Economy – Bloomberg

Treasury Secretary Timothy F. Geithner said China’s exchange-rate policy is an impediment to a more balanced global recovery and allowing the yuan to strengthen would benefit Chinese consumers.

“The distortions caused by China’s exchange rate spread far beyond China’s borders and are an impediment to the global rebalancing we need,” Geithner said in prepared testimony before the Senate Finance Committee today. A more flexible yuan would allow China to pursue “a more effective, independent monetary policy, which is particularly important now, with China’s economy facing a risk of inflation in goods and in asset prices.”