DALLAS (Reuters) - Treasury Secretary Timothy Geithner said on Thursday that he saw no risk to the dollar from China’s efforts to encourage other emerging market economies to use the yuan more in international trade.
“What you’re seeing China do is gradually dismantle what were a comprehensive set of very, very tight controls on the ability of countries to use their (the Chinese) currency,” Geithner told an event at the Dallas Regional Chamber.
“Over time that will mean - and this is a good thing for the United States - more use of that currency and it will mean the currency will have to reflect market forces ... So, I see no risk to the dollar in those reforms,” he said.
China is planning to extend renminbi-denominated loans to its fellow BRICS countries - a grouping that includes China, Russia, South Africa, Brazil and India - in an attempt to boost trade between the leading emerging market nations and promote the use of the yuan, according to the Financial Times.
Geithner said he was skeptical the yuan, or renminbi, would soon become a world currency.
“I don’t think so. I don’t know, maybe in some long time after we’re all gone, it would be possible,” Geithner said after he toured a railcar facility here.
However, China’s transition from an economy fueled by exports to one driven more by domestic demand is partly why the value of China’s currency “is moving up against the dollar,” he added.
In Dallas to meet with regional business leaders and promote the Obama administration’s economic policies, Geithner also said the United States’ government could afford to extend tax breaks for middle-class Americans beyond the end of the year.
Individual tax cuts enacted under the Bush administration expire December 31 and the Obama administration wants to allow tax breaks for the wealthiest Americans expire.
On Thursday, Geithner repeated that the tax burden on the top 2 percent of Americans had to go up again “as part of a balanced plan to bring down our fiscal deficits down to a sustainable level.”
“There is no real alternative to doing that,” the U.S. Treasury secretary added. “Those should be allowed to expire, but the middle-class tax cuts we think we can afford to extend.”
Reporting by Jon Nielsen, Doug Palmer, Rachelle Younglai; Editing by Gary Crosse