Tim Geithner today accused China of "manipulating" its currency, a volatile charge in the diplomatic world that is certain to anger Beijing and possibly prompt it to sell some of its massive reserves of US dollars, the New York Times reports. The Treasury nominee made the accusation in a written response to senators, though it's unclear if the Obama administration will press ahead with a formal legal finding, the Times notes.
“The signal this sends is not good,” one trade expert told Bloomberg, referring to ties between the two nations. “It opens a Pandora’s box. We need the Chinese to hold onto their Treasury and agency debt." By keeping its yuan artificially low against the dollar, Beijing can make its exports more competitive. Geithner's statement signals that the Obama will take a tougher stance on China than Bush did.