US senate bill would penalise China over currency strength

City A.M. Reporter
US Treasury secretary Timothy Geithner yesterday insisted there was “no way” major credit rating agencies will cut the gilt-edged rating that they assign to US debt offerings.

“What people who look at our country – credit rating agencies, investors, Americans – what they look at is whether we have the political will to restore gravity to our fiscal position,” Geithner said in response to questions at a US House of Representatives Appropriations Committee hearing.

He said the Obama administration will “dramatically” lower deficits over the next four to five years as a percentage of total economic output and said Congress should help in enacting measures to control spending. Geithner said if the credit rating was lowered, it would cost more to borrow but insisted it won’t happen.

“There’s no way that’s going to happen,” Geithner said. “There’s not a chance that that’s going to happen to this country but it’s very important for people to recognise that... this recovery will be weaker if we don’t do a better job together over time of demonstrating that we’re going to have the political will to make tough choices.”

Meanwhile members of the US Congress threatened Beijing with duties on some of its exports if it fails to revalue its currency, pressuring the Obama administration to label China a currency manipulator.

A bipartisan bill introduced in the US Senate merges previous legislative efforts to press China to change policies that keep its yuan currency cheap, effectively subsidising Chinese exports and taxing competing imports.