Geithner warns China again that its currency is undervalued.

WASHINGTON — China's currency is
substantially undervalued, and Beijing is moving
too slowly to fulfill its promise to let it rise,
Treasury Secretary Timothy Geithner said again
Wednesday.
Geithner said it's in China's interests to accelerate
the pace of currency reform. He said the
undervalued yuan is increasing the risk of inflation
that will harm Chinese growth.
Geithner's comments came in a speech
previewing the administration's policy positions in
advance of Chinese President Hu Jintao's visit to
Washington next week.
Economic tensions have been rising between the
world's two largest economies at a time when
America's trade deficit with China has ballooned
and its unemployment rate remains high.
American manufacturers contend that China's
yuan currency is undervalued as much as 40%.
This gives China a tremendous competitive
advantage in trade because it makes Chinese
products cheaper in America and U.S. goods
more expensive in China.
China in June pledged to allow more flexibility in
its currency. But Geithner said that since that time
the yuan has risen in value against the dollar by
only about 3%.
China's undervalued currency imposes costs not
only on U.S. companies but on other countries
that have more flexible exchange rates, Geithner
said.
"This is not a tenable policy for China or for the
world economy," Geithner said. "We believe it is
in China's interests to allow the currency to
appreciate more rapidly in response to market
forces. And we believe that China will do so
because the alternative will be too costly — for
China and for China's relations with the rest of the
world."
Last September, the U.S. House of
Representatives passed legislation that would
impose economic sanctions on China unless the
country allowed its currency to rise more quickly.
The measure was not considered in the Senate.

Source: Http://www.usatoday.com/money/world/2011-01-12-geithner-china-currency_N.htm