US-China Relations by Sec. Geithner

The transcript discusses the rapid growth of U.S. exports to China and the opportunities for U.S. companies operating there. It highlights China's management of its exchange rate and the restrictions on capital movement, which keep the Chinese currency undervalued. This policy affects other emerging economies by reducing their competitiveness. The transcript warns of the risks China faces if it does not allow its currency to appreciate, such as domestic inflation and asset price increases. It emphasizes the importance of China allowing its currency to appreciate in response to market forces to avoid costly consequences for both China and its global relations.

What is one consequence of China's management of its exchange rate?

• Increased competitiveness for other emerging economies

• A substantial loss of competitiveness for other emerging economies

• A decrease in U.S. exports to China

• A rise in global inflation rates

What risk does China face if it continues to keep its currency undervalued?

• A boost in global economic growth

• An acceleration of domestic inflation

• A reduction in asset prices

• A decrease in domestic inflation

How much has the Chinese currency appreciated against the dollar in nominal terms since June 2010?

• About 3 percent

• About 6 percent

• About 9 percent

• About 12 percent

Why is the real rate of appreciation important for firms?

• It only matters for government policies

• It affects their decisions on what to purchase and invest in

• It determines the nominal value of their investments

• It has no impact on their business strategies

What is the potential consequence for China if it does not allow its currency to appreciate more rapidly?

• An increase in global competitiveness

• Costly consequences for China and its global relations

• A decrease in domestic inflation

• Improved relations with the rest of the world