UPDATE 1-Geithner says expects China to move on forex policy

Tue Mar 16, 2010 5:20pm EDT

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WASHINGTON, March 16 (Reuters) - U.S. Treasury Secretary Timothy Geithner said Tuesday he thinks China eventually will decide it needs to adopt a flexible currency exchange rate policy.

"It's an important issue for China, for all China's trading partners, and I'll say as I've said before, I think China will decide ultimately it's in their interest to move," Geithner said in an interview on Fox Business Television.

"I think ultimately they're going to decide over time it's in their interest to move to a more flexible exchange rate," he added.

Geithner was pressed to say whether he supported a move in the U.S. Senate, pushed by Democratic Senator Charles Schumer, to levy duties on some Chinese-made goods unless Beijing agrees to revalue its currency.

U.S. exporters maintain China's yuan, also called the renminbi, is undervalued by as much as 40 percent, giving its products an unfair price advantage in U.S. and other foreign markets. Chinese leaders have pushed back, saying other countries have no right to criticize its currency policies.

Geithner said Schumer's proposals were "just an illustration of how strong people feel about this, and it's understandable and it's true in countries around the world."

Treasury is scheduled to issue a semiannual report by April 15 on trading practices of key trade partners, including China, and must say whether any country is deliberately manipulating its currency.

Geithner avoided a direct reply when asked whether he felt China was a currency manipulator.

"We haven't made that judgment yet, but I want you to know again this is an important issue for the United States," he said, "It's an important issue for the global economy and I think China has said in the past that it's important they move, that it's important they decide it's in their interest to move."

Geithner said he wasn't concerned about a potential trade war breaking out with China and pledged to "work very hard to make sure that U.S. firms will be able to compete on a level playing-field with China, in China and in the United States." (Reporting by Glenn Somerville and Lesley Wroughton; Editing by Kenneth Barry)

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