With China's president set to arrive in Washington next week, Treasury Secretary Timothy F. Geithner on Wednesday laid out a list of concerns that he says the U.S. has with the rapidly rising Asian nation, including unfair government subsidies, theft of intellectual property and its undervalued currency.
In a speech ahead of Hu Jintao's state visit next Wednesday, Geithner said that China presents "enormous opportunities for the United States." U.S. exports to China, he pointed out, are growing at twice the rate of exports to the rest of the world.
But, in remarks that reflect some of the tough discussions awaiting Hu and President Obama, Geithner said China's "size, the speed of its ascent and its policies are a growing source of concern both here and around the world."
One of the biggest of those concerns has been China's policy of tightly managing its exchange rate. Many policymakers and analysts argue that the Chinese yuan is significantly undervalued, thus giving China's exporters an unfair advantage by making their goods cheaper in overseas markets.
Geithner and Obama have repeatedly urged Chinese leaders to adopt a more flexible currency policy, and since last June the yuan has risen about 3.5% against the greenback. But that's far short of what some U.S. lawmakers and officials say is needed to create a more level playing field in trade.
On Wednesday, Geithner spoke in a direct and firm manner, saying that Beijing's currency practice "is not a tenable policy for China or the world economy." In addition to stymieing American interests, Geithner said, China's undervalued currency imposes substantial costs on other developing countries.
As in the past, Geithner appealed to China's self-interest in arguing that it should allow the yuan to appreciate more rapidly, saying it would help control risks of spiraling inflation — something that Beijing is contending with now.
"It's going to happen, it has to happen, because the fundamental forces that are pushing Chinese productivity growth and are pushing inflation higher will bring about the necessary adjustment in interest rates," he said in a question-and-answer session following his talk.
Geithner noted Wednesday that China, for its part, wants more access to U.S. technology goods and investment opportunities as well as to be treated more like other market economies.
"We are willing to make progress on these issues," he said, "but it's important to recognize that our ability to do so will depend of course on how much progress we see from China."
Despite the concerns directed at the Chinese, Geithner also said that at the end of the day, the prosperity of the U.S. economy depends on the choices the U.S. makes and the policies it pursues to strengthen American competitiveness, including more investment in research, infrastructure and education.
"China's rise offers us the opportunity of dramatic growth in demand for things Americans create and produce," he said. "But it will also force us to raise our game."