“I was just in the neighbourhood; thought I'd say hi.” Tim Geithner's lightning visit to Beijing, via Mumbai and Hong Kong, is undeniably good news for the G2. It suggests the US and China are moving from confrontation to coordination, not least on the vexed issue of the renminbi – the ostensible focus of the US Treasury Secretary's talks yesterday with Chinese vice premier Wang Qishan. Even without Mr Geithner's urgings, though, there are signs that action on the currency is on the cards.
The People's Bank of China yesterday resumed the issuance of three-year bills, for the first time since 2008, which would lock up banks' cash for longer periods. That could be intended to counter the impact of capital inflows unleashed by a strengthening currency. The country is already awash with the stuff. By Nomura's simple measure – broad money supply growth minus nominal GDP growth – China's excess liquidity is advancing at about 15 per cent, year-on-year.
Second, as Royal Bank of Scotland notes, the PBoC has recently appointed three new academic members to its policy committee, all speaking freely to the media. Granted, the Bank has less influence on foreign exchange policy than less-talkative economic planners at the Ministry of Commerce or the National Development and Reform Commission. But by thinking aloud, the PBoC supports the idea that China will soon de-peg to embrace a “basket, band and crawl” regime.