WASHINGTON  Timothy F. Geithner, who moved closer to confirmation as Treasury secretary on Thursday, told senators that President Obama believed China was “manipulating” its currency, suggesting a more confrontational stance toward that country than under the Bush administration.
Mr. Geithner’s comment was made in writing to the Senate Finance Committee hours before it voted 18 to 5 to recommend that the full Senate confirm him. The statement, which is certain to anger the Chinese government, comes at a particularly sensitive time, with economies in both the United States and China weakening and tensions already rising around the globe over trade. The United States, moreover, is increasingly dependent on China to finance its ballooning deficit.
An administration official said that Mr. Geithner was only repeating what Mr. Obama had said during the campaign, and pointed out that his statement also emphasized that the president intended to use “all the diplomatic avenues available to him” to address the currency question.
It remained unclear whether Mr. Geithner was signaling that Mr. Obama would officially declare later this spring that China was engaging in currency manipulation, when the administration is required by a 20-year-old trade law to report to Congress on exchange rate issues. Such a finding would begin a legal process that starts with diplomacy and could end with the imposition of trade barriers like tariffs. The objective would be to persuade China to let the value of its currency, the yuan, freely float  a move that would let its value rise and would increase the cost of its exports.
Timothy F. Geithner, Barack Obama's nominee for Secretary of the Treasury, had his confirmation hearing on Thursday in the United States Senate. If confirmed he will succeed Henry Paulson in this position, which is analogous to the finance minister in other nations.
Tim Geithner 
During Geithner's testimony in the Senate, he said that the Obama administration believes China is "manipulating" its currency. ''The New York Times'' says this suggests a confrontational stance toward China on trade issues.

"President Obama backed by the conclusions of a broad range of economists believes that China is manipulating its currency," Geithner said in his written responses to the Senate.

In his spoken response, Geithner said he would "use aggressively all diplomatic avenues open to him to seek change in China's currency practices."

"The signal this sends is not good for China-US relations", said Charles W. Freeman, a fellow at the Center for Strategic and International Studies and former head trade negotiator for China at the Office of the United States Trade Representative. "It opens a Pandora’s box. We need the Chinese to hold onto their Treasury and agency debt."

China "will be more than annoyed — they don’t like being singled out, and they don’t like countries explicitly criticizing them for the way they run their economy," said Nicholas Lardy of the Peterson Institute for International Economics.

Bloomberg L.P. said that US treasury securities dropped in value following Geithner's statements.

"It has to be done very carefully," said Frank Vargo, VP at the National Association of Manufacturers. "You know the world has changed a lot with the financial crisis and China has a lot in U.S. Treasuries. This needs to be done in a cooperative, not a confrontational, way."

"But...we all know the Chinese currency is deliberately undervalued," Vargo added.

Geithner was also questioned about taxes he failed to pay on income earned while working for the International Monetary Fund. However, this issue was largely forgiven by the senators.

Senator Orrin Hatch said he was certain Geithner was "a person of great integrity, even though he’s made these mistakes."

Senator John Cornyn said he was "willing to give Mr. Geithner the benefit of the doubt" on his tax mistakes.

Senator Jon Kyl was not as forgiving on the tax issue. "He Geithner has not been as candid with me or the committee as I think he should have been," Kyl said.

US law requires the Treasury to list countries that manipulate their currency. Former Secretary Paulson cited the 21% appreciation of the yuan since July 2005 as evidence that China was not manipulating the exchange rate, and kept China off the list.