The United States pressed China Saturday to make progress on its recently announced currency reform to make the yuan more flexible, calling it key to healthy global economic growth.
U.S. Treasury Secretary Timothy Geithner said that despite global trade imbalances being lower than levels before the 2008 financial crisis, further action was needed to guard against renewed unsustainable imbalances.
"China's recent decision to widen the daily trading band for its exchange rate, if implemented in a way that allows the value of the exchange rate to reflect market forces, could contribute to this rebalancing," Geithner said in a statement.
"While we welcome the progress to date, the process of correcting the misalignment of China's exchange rate remains incomplete and further appreciation is necessary, and in China's interest."
Geithner said that while countries with trade deficits have worked to raise domestic savings, those with trade surpluses, such as China, still lacked sufficient domestic consumption.
"The global economy and job creation are being hindered by insufficient aggregate demand growth. We therefore need to see stronger acceleration of growth in domestic demand in current account surplus economies, as well as greater exchange rate flexibility in countries such as China," he said.
Beijing's trading partners have long criticized the yuan exchange rate, saying it is kept artificially low to fuel a flow of cheap Chinese exports, triggering huge trade deficits in the United States and Europe.
The Chinese central bank recently announced it would allow the yuan to fluctuate against the dollar by 1.0 percent on either side of a trading band.
The yuan was previously allowed to move just 0.5 percent either side, which helped keep it closely tied to the movements of the U.S. greenback.
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