World economic forum

Whether the Treasury Department would go so far as to officially label China as a manipulator in its April report remains to be seen. But in the same statement in which Geithner used the “m” word, he went on to say, “The question is how and when to broach the subject in order to do more good than harm.”

Tensions came to a head at the annual World Economic Forum in Davos, Switzerland, which began on Jan. 28 and ended Feb. 1. Speaking to the forum’s participants, which included global business and government leaders from around the globe, Chinese Premier Wen Jiabao attributed the global recession to (among other things) “inappropriate macroeconomic policies of some economies and their unsustainable models of development” and “excessive expansion of financial institutions in blind pursuit of profit.” Without specifically naming the U.S., the premier aimed his blame squarely at the West.

Overall, however, his speech remained positive and the focus quickly turned to the future of China’s economy.

He went on to say he expects the Chinese economy to continue to grow by 8 percent in 2009, and highlighted his Government’s plan to invest more than $500 billion into the economy over the next two years, a sum equivalent to approximately 16 percent of China’s 2007 GDP.


“I want to reaffirm here China’s abiding commitment to peaceful, open, and cooperative development,” Wen Jiabao said to close his speech. “The harsh winter will be gone and spring is around the corner.”

While the premier remains positive, some believe it might be a while before China allows the yuan to appreciate significantly again.

“Despite the U.S. policy or whatever the Treasury secretary has to say, the Chinese do what they want to do,” Dolan says. “Until they feel comfortable that their growth outlook is going to change, [the yuan’s gradual appreciation] is likely to remain on hold, and that’s going to keep the yuan steady between 6.8 and 6.9.”