(eToro Blog) U.S. Treasury Secretary Tim Geithner is meeting Chinese Premier Wen Jiabao and other Chinese officials this week in an effort to narrow the trade gap with China and resolve disputes over the Yuan exchange rate. Geithner commented that China and the U.S. share close relationships on the topic of economic growth, financial stability and nonproliferation. Chinese Vice Premier Wang said that the two countries have a lot of issues to discuss in the areas of economy, finance, trade and investment. Wang said, “Apart from the bilateral aspect, we are also having important cooperation in the multilateral and global arena in the areas of economy, finance, trade policies and also G-20 related affairs.”
Geithner will raise the issue of the Yuan and its valuation against the U.S. Dollar. The Treasury Department has asserted that Yuan is undervalued and the U.S. wants policy changes that will bring more exchange rate flexibility. The Yuan is trading around 6.3150. Economists believe that the real value of the Yuan needs to rise by 10 to 20 per cent. China is the largest foreign holder of U.S. debt amounting to around $1.13 trillion.
China’s growth is expected to slow down to 8.5% this year. This is in comparison to 9.2% growth seen in 2011. The People’s Bank of China lowered the reserve ratio for banks in December in an effort to stimulate growth. Real estate prices in China have slumped in the last few months, sending many home owners under water on their mortgages.
Most Asian stock indices rose except for the Shanghai index. The Japanese Nikkei rose 0.3%, the Hang Seng rose 0.78%, the Shanghai index dropped 0.42% and the Australian S&P ASX rose 0.86%. Traders on OpenBook are primarily short the AUDUSD with average limits at 1.0200 and stops at 1.0350.
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