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US Treasury secretary describes yuan reform as 'significant' and 'promising'

WASHINGTON--Treasury Secretary Timothy Geithner on Wednesday described China's decision to allow the yuan to float more freely as part of reforms that are “very significant” and “very promising.”

Speaking a glowing tone that is rarely heard in Washington when discussion China, Geithner lauded a recent decision by China's central bank to allow the yuan to fluctuate up to 1 percent on either side of its trading band.

The yuan was previously allowed to move just 0.5 percent on either side, which helped keep it closely tied to the movements of the U.S. greenback.

“I think the cumulative effect of what China's done on the exchange rate side, on the external side is very significant and very promising,” he said speaking at a Brookings Institution event.

Beijing's trading partners have long criticized its yuan exchange rate, saying it is kept artificially low, fuelling a flow of cheap Chinese exports that have helped trigger huge trade deficits in the United States and Europe.

And China's currency rate is a hot-button electoral issue in the United States, with some lawmakers and leading Republican presidential candidate Mitt Romney baying for retaliatory sanctions against China.

Geithner said that China did still need to do more, but appeared to give calls for sanctions little truck.

“They've allowed the yuan to appreciate against the dollar in real terms, so about 14 percent since June of 2010. If you look back relative to 2005, it's more like 45 percent. Pretty significant adjustment in real terms.”

Geithner also cited Chinese capital market reforms — which could help balance trade — and less intervention in currency markets as positive signs.

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