September 30, 2010 / 10:03 PM / 9 years ago

UPDATE 1-US, China not headed for currency war- Geithner

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WASHINGTON, Sept 30 (Reuters) - The United States and China can manage differences over Beijing’s currency policies without starting a trade war that damages both sides, U.S. Treasury Secretary Timothy Geithner said on Thursday.

“We’re not going to have a trade war. We’re not going to have currency wars,” Geithner said one day after the House of Representatives passed legislation authorizing countervailing duties against China’s “undervalued” currency.

“A substantial fraction of the Chinese leadership understands it is very important to them economically to let this exchange rate move,” Geithner said at a public event.

“I think they also understand they have a huge interest in trying to make sure that they’re able to continue to enjoy access not just to our market on favorable terms, but access to a global market that depends a basic sense that people are playing with a set of acceptable norms,” he said.

“I believe we can manage this thing in a way that helps us make progress going forward,” Geithner said, noting that China’s yuan has risen at a more rapid pace since Sep. 2.

“If that would continue, I would think it would make a really material difference on their economics and our economics,” Geithner said.

It is important at this moment in the global economic recovery that the United States and China continue working together through forums such as the Group of 20 nations and the International Monetary Fund, he added.

Geithner avoided taking a position on the House bill which must also be approved by the Senate to become law.

But he said it was essential any legislation be consistent with world trade rules and provide more benefit for the United States than risks.

Geithner was not asked whether the Treasury Department would label China a currency manipulator in an semi-annual report next due on Oct. 15.

It has declined to do that in three previous reports since President Barack Obama took office, frustrating many lawmakers.

House Ways and Means Committee Chairman Sander Levin has said one reason he decided to move currency legislation was because Geithner testified to Congress that labeling China a manipulator was a useless gesture.

That is because it would only require the United States to initiate talks with China on currency and the Obama administration is already doing that, Geithner said in testimony to Congress earlier this month.

Reporting by Glenn Somerville and Doug Palmer; Editing by Leslie Adler and Andrew Hay

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