WASHINGTON (MNI) – China is slowly easing off the gas pedal as its
economy expands in order to avoid overheating, and this slightly slower
pace poses no risk to the U.S. or global economy, U.S. Treasury
Secretary Timothy Geithner said Wednesday.

Europe, on the other hand, “will be dragging growth for us,”
Geithner said in an interview on the Fox Business Network.

On whether issues in China could derail the United States economy,
Geithner said “I don’t think there is any sign of that happening at the
moment.”

China’s growth is slowing to a more “sustainable pace,” he said, as
previously “they were growing faster than they could sustain over time.”

And so, by design, China’s government began to gradually tamper the
rate of growth, he added, because it was growing too fast.

“It looks to most people now that they’ve been able to slow it to a
more sustainable level,” Geithner said, which will benefit the U.S.
given China’s importance as a key export market.

“I would expect them to be source of strength for the world economy
for some time,” he said.

On the issue of renminbi, Geithner said China is trying to be more
responsive to U.S. concerns about having a level playing field.

“The currency is moving up in real terms,” he said. “We want it to
move further … but we are making some progress.”

“The economy is gradually getting stronger,” Geithner said, citing
the very rapid rise in U.S. exports and growing investments.

“It helps remind people that even with a tough economy and a lot of
tough challenges ahead, we are really getting stronger and there is a
lot of strength here too,” he said.

In terms of big risks to the recovery, Geithner noted that “Europe
is still facing a very difficult, very challenging period and is likely
to have very weak growth.”

In addition, the fear about an escalation in tensions over Iran’s
nuclear program, and the resulting rise in oil prices, is having an
impact on consumers’ pocketbooks, he said, even it is not hurting the
economy today.

Politics is another major risk, Geithner continued, with the Bush
tax cuts set to expire at the end of this year while a raft of spending
cuts come into effect.

“What you need to help make sure this economy is strengthened is
give the American people more confidence that their political leaders in
Washington are going to come together, make the compromises they need to
another substantial downpayment on long term deficit reduction,” he
said.

Despite all this, the U.S. economy has been growing at “moderate
pace” for the past two and a half years, more jobs are being created by
the private sector, and private investment is growing “quite strongly,”
Geithner said.

“What we should be doing is trying to make sure that we are
reinforcing this modest strengthing growth,” he said.

As for growing concern about the risk posed by the large amount of
student loan debt held by many Americans, Geithner said there is no
chance of a bigger crisis than the 2007 meltdown in the housing market.

“There is no risk for that,” he said.

** MNI Washington Bureau: 202-371-2121 **

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