Blatant display of double standard as usual: What Geithner has to say about totally similar systems in Singapore and Vietnam where the State controls about every single big business?

Treasury Secretary Geithner, in Davos on Friday, took aim at China.

U.S. Raps 'Damaging' China Policies


JANUARY 28, 2012
By AARON BACK
The Wall Street Journam

DAVOS, Switzerland—U.S. Treasury Secretary Timothy Geithner sharply criticized China's state-led economic system on Friday, the latest salvo in an escalating trade conflict between the two countries.

"China does present a really unique challenge to the global trading system, because the structure of its economy, even though it has more of a market economy now, is overwhelmingly dominated by the state," he said at a public forum in Davos, Switzerland, during the World Economic Forum.

Chinese policies, including subsidized prices for energy and land and preferential access to capital, have been "very damaging" to trade partners, he said. "That's why it's very important that we get China to move comprehensively not just on the exchange rate but on dialing back its subsidies and distortions."

China's state-led capitalist system emerged as a hot topic at the World Economic Forum this week, as participants pondered the country's economic success in contrast to recent challenges faced by more free-market systems in the U.S. and Europe. Even within China, there has been rising debate over how fast to move ahead with liberalizing reforms and what kind of economic model the country ultimately aims for.

On the issue of the Chinese currency, Mr. Geithner argued that though the yuan has appreciated, it remains undervalued and is "still below almost all measures of fundamentals."

The yuan should rise not just against the U.S. dollar but also against the euro and the yen, he added.

In 2011, the yuan rose nearly 5% against the U.S. dollar, and around 6% against the euro.

Mr. Geithner's remarks fit the Obama administration's broader effort to be more assertive with China this election year, at a time when U.S. economic growth remains tepid and unemployment high.

Still, the tone was milder than that struck this week by President Barack Obama. In his State of the Union address, the president said this administration has brought trade cases against China at nearly twice the rate as the last administration, and added, "But we need to do more. It's not right when another country lets our movies, music and software be pirated. It's not fair when foreign manufacturers have a leg upon ours only because they're heavily subsidized."

Mr. Obama then announced plans to create a U.S. government task force designed to monitor China for possible trade and other commercial violations.

The White House plans to get tougher with Beijing on issues of currency, market access and intellectual property rights—all topics expected to be raised when China's Vice President Xi Jinping visits Washington next month.

The administration's moves are no surprise to Beijing. Mr. Geithner discussed the administration's plans with China's leaders during a trip there earlier this month. And Mr. Obama telegraphed his plans to challenge China more during his trip through Asia in November.

Members of Congress have increasingly pressured the White House to get tougher with China, and doing so has bipartisan appeal. Lawmakers of both parties, as well as union leaders and business owners, blame China for U.S. job losses and complain that China has unfair economic advantages.

At an earlier Davos panel on Friday hosted by the pro-reform Chinese magazine Caixin, editor-in-chief Hu Shuli identified delayed economic reform as one of the key risks for the Chinese economy, along with weakening exports in the wake the of the euro-zone crisis.

Reform efforts have stalled in China since the outbreak of the global financial crisis in 2008, which to many Chinese severely discredited the Western free-market model. Key reforms that would open up the country's financial sector such as the liberalization of interest rates and the opening of the capital account have been put on the back burner, and the timeline for their realization is uncertain.

The stall in liberalization has led to increasing public frustration on the part of some pro-reform intellectuals in China.

"What we need is reform-minded leaders and grassroots entrepreneurs, not a loose monetary policy and low interest rates," Zhang Weiying, a professor of economics at the elite Peking University, said at the Caixin forum in Davos.

Xu Xiaonian, an economics professor at the China-Europe International Business School, was even more strident in his remarks, saying China's state-capitalist model was in fact pioneered by Otto Von Bismarck, the 19th-century statesman credited with uniting Germany.

"When Bismarck invented this idea in 1870 it gave Germany impressive performance over the main superpower of the time, Great Britain," he said. But the state-capitalist system, he argued, ultimately played a role in precipitating two world wars and Nazism.