US Must be Careful with Chinese Yuan Issue

It appears Timothy Geithner, recently-appointed US Treasury Secretary, was not exaggerating when he declared that the Obama administration intends to address China's currency policy. No less than President Obama himself rrecently called Hu JinTao, President of China, to inform him likewise. Unfortunately, the administration does not exactly have support from political and economic analysts. They argue that not only is the Yuan's "true" value debatable, but also that now is not an opportune time to pursue this issue, due to current economic circumstances. Givent that the Yuan has been permitted to appreciate almost 20% in the last four years and that the Chinese accumulation of forex reserves has begun to slow, perhaps Obama's prodding could even backfire. Bloomberg News reports:

There’s also a be-careful-what- you-wish-for angle here: If China tomorrow let the yuan trade freely in markets, it’s more likely to drop in value than surge. So-called hot money may flee, global companies may repatriate profits and Chinese savers might buy overseas assets.

Read More: China Tells Obama What to Do With His Yuan Views