Geithner’s Yuan Call Rejected as ‘Horrible Advice’

[Enivid]

U.S. Treasury Secretary Timothy Geithner’s call for China to loosen restrictions on its currency was criticized by economists and policy makers at the World Economic Forum.

Allowing the yuan to strengthen would be “economic suicide” amid an economic slump, Stephen Roach, Morgan Stanley’s Asia Chairman, told a panel in Davos, Switzerland, yesterday. “I’ve never seen an economy in recession voluntarily raise their currency. It’s horrible advice.”

Renewed clashes over the yuan threaten to stoke tension between two of the world’s biggest economies and undermine cooperation to counter the global recession. China limited yuan gains against the dollar in July 2008 after the currency rose 21 percent following the end of a peg three years earlier.

“Shouting from Washington to Beijing is not going to make a difference,” said South Africa’s Finance Minister Trevor Manuel on the same panel.

Geithner, who took office this week, said Jan. 22 President Barack Obama believes China is “manipulating its currency,” suggesting the new administration may take a tougher line with the biggest foreign buyer of U.S. government debt.

From Bloomberg News.