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Bernanke says China's might no threat
(Reuters/chinadaily.com.cn)
Updated: 2006-02-17 06:59

Not only lawmakers but the Bush administration has grown increasingly frustrated with China, particularly over its reluctance to let its yuan currency rise in value.


A mix of the Chinese currency the yuan, the US dollar and the euro. [Reuters]
U.S. Treasury Secretary John Snow strongly hinted on Thursday that Treasury was considering naming China a currency manipulator in a report scheduled for release in April -- a step that could open China to U.S. trade retaliation.

"You always want to take market reaction into account when government makes a determination," Snow told reporters in Chicago when asked whether top officials were discussing the possibility privately with investors.

"Prudent governments will always try and assess markets and try and prepare markets so markets aren't disrupted," he said.

Earlier this week, U.S. Trade Representative Rob Portman issued a report vowing to take tougher steps to make China play fair on trade.

Bernanke, under persistent questioning, said he thought China should adopt a more flexible currency because it was in its own best interest to do so. China now needs to keep recirculating its huge income from selling abroad for fear it could spark inflation in its domestic economy.

Bernanke was sworn in as Alan Greenspan's replacement on February 1. This week's testimony before the House and Senate was the first time that lawmakers had a chance to test his opinions on how to deal with a worsening U.S. trade picture and fix burgeoning government red ink.

As he did on Wednesday, Bernanke answered crisply and directly, sticking to the topic of the questions, unlike his predecessor Greenspan who frequently digressed into subjects far afield from monetary policy.

Republican Sen. Jim Bunning of Kentucky praised the new Fed chief's plain-spoken style and advised him to avoid Greenspan's example.

"Do not try to follow in your predecessor's footsteps," Bunning told Bernanke. "In other words, be yourself, don't be 'Greenspan lite'."

Bernanke again stressed the Fed's commitment to keep inflation contained and noted the economy also faced a number of downside risks.

The U.S. central bank has raised overnight interest rates to 4.5 percent in 14 small steps dating to June 2004. Markets expect another quarter-percentage point rate hike when Bernanke leads his first policy-making session on March 27-28 and a good chance of a second one by mid-year.


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