By Ben Blanchard
BEIJING, Jan 25 (Reuters) - Criticism that China is manipulating its currency is misplaced, unfair, unjust and being used an excuse for trade protectionism, a commentary by the official Xinhua news agency said on Sunday.
U.S. Treasury Secretary-designate Timothy Geithner said this week that Beijing was manipulating its currency exchange policies to gain an unfair trade advantage, comments already rebuked by China's central bank. [ID:nN22364222]
"These comments do not only not accord with reality, they are also a misinterpretation of the main reasons for the financial crisis, and will encourage the rise of trade protectionism in some Western countries," the commentary said, without directly naming the United States.
Such remarks about the Chinese yuan "divert international society's attention from current pressing global economic problems and are extremely unbeneficial to handling the financial crisis", Xinhua added.
The spat marks a testy start to ties between Beijing and the new administration of U.S. President Barack Obama, which may undermine promised cooperation in combating the global economic slowdown and security threats.
China worries that its already slowing exports will be even harder hit by U.S. policies to narrow their trade imbalance.
Many U.S. lawmakers believe the yuan
But making it harder for China to export would only harm the consumers of countries whose lives have been made better by Chinese products, Xinhua said.
"In the face of the financial crisis, Western countries need to take a good long look at themselves and not direct specious criticism at emerging economies," it added.
"Over the past few months, China has all along stretched out its hand to international society to deal with the financial crisis, and in this regard has played a constructive role," Xinhua said.
"At this juncture to use the renminbi issue to criticise China is unfair and unjust," it added, referring to the currency's formal name.
Xinhua repeated the standard government line that China was committed to "perfecting the renminbi exchange rate mechanism".
"This is not only in China's interests, it also helps maintain the stability of the global financial system," it said.
Under former President George W. Bush, the U.S. Treasury urged Beijing to move to a market-determined exchange rate and saw some progress since July 2005.
Yet it refused to formally call China a currency manipulator, which under U.S. law would require the Treasury Department to begin "expedited" negotiations with Beijing to reduce China's trade surplus and eliminate any "unfair" currency advantage.
The dollar has weakened by about 16 percent against the yuan since China revalued it in mid-2005, according to Reuters data. But many U.S. industry groups say it is not enough.
The yuan closed lower against the dollar on Friday and traded mostly below the Chinese central bank's mid-point, with speculation that Geithner's comments could spark a brief period of modest yuan depreciation. [ID:nSHA22705] (Editing by Tomasz Janowski)