Global economic reforms are being impeded by China's refusal to revalue its currency, the Yuan, US Treasury Secretary Timothy Geithner has said. Addressing the US Senate Committee on Finance he said that distortions caused by China's stance were an impediment to the global rebalancing we need.
The US has long complained that Beijing keeps the Yuan undervalued against the US dollar to gain a trade advantage. Some analysts argue the Yuan is undervalued by as much as 40%.
China pegged the value of the Yuan to the US dollar in 2008 in order to keep its exporters competitive amid falling demand in the global recession.
Mr Geithner said that Beijing's shackling of its currency, also known as the Renminbi (RMB), to the dollar was causing other Asian countries to intervene in foreign exchange markets at record levels.
A more flexible RMB will allow market forces to play a more active role over time in facilitating strong, balanced and sustainable growth globally, Mr Geithner said.
Last month, at high level trade talks with the US, China said it would seek gradual progress on reforming the exchange rate of the Yuan, but set no timetable for doing so.
On Thursday the US Commerce Department revealed that US trade deficit widened to a 16-month high in April, 40.3 billion USD and up 0.5% from March, as both imports and exports fell slightly.
Exports fell 0.7% from March to 148.8 billion, slightly faster than the 0.4% drop in imports to 189.1 billion. The figures also showed that the trade deficit with China widened by 14.3% to 19.3 billion, which is the highest level since November last year.
Earlier, China had reported a higher-than-expected trade surplus for May, which was seen as giving ammunition to those in the US who argue the Chinese Yuan is undervalued.
The latest US trade data showed that despite the small monthly fall in exports and imports, total trade volumes in April were much higher than the lows reached a year ago, when international trade collapsed in the wake of the financial crisis.
Exports were up 19.9% from April 2009, while imports were up 23.9%, but trade levels remain well below the pre-crisis levels.