Currency Strains Seep Into Beijing Summit Goodwill

US President Barack Obama on Tuesday urged a reluctant China to let its yuan currency rise in value at a summit where strains over trade between the two giants crept into proclamations of goodwill.

Standing beside Obama after the summit, Chinese President Hu Jintao avoided mentioning the yuan or the dollar.

Instead, Hu emphasized the need to avoid trade protectionism in a thinly veiled reference to China’s irritation over new US tariffs on Chinese-made tyres and other products.

With US unemployment at 10.2 percent, one of Obama’s top priorities during his trip to China is pressing Beijing over the huge trade imbalance between the two countries, a move he believes would lead to for greater US export opportunities.

Washington argues that an undervalued yuan is putting US manufacturers at a disadvantage and stoking global economic imbalances.

“I was pleased to note the Chinese commitment made in past statements to move toward a more market-oriented exchange rate over time,” Obama said as Hu stood next to him.

Obama said movement by China on its exchange rate would “make an essential contribution to the global rebalancing effort”.

But his reference to China’s “past statements” on currencies indicated Hu might not have been forthcoming on how Beijing might respond.

Hu said the two leaders talked of the need to keep in close contact on “macroeconomic and financial policies and continue to consult, on an equal footing, to properly resolve and address economic and trade frictions.”

“I stressed that under the current circumstances, we need to oppose all kinds of trade protectionism even more strongly,” Hu said.

Sun Zhe, director of the Center for US-China Relations at Tsinghua University in Beijing, said Hu’s silence on the currency may stem in part from a reluctance by China to be seen making policy concessions under foreign pressure.

“I personally think that there may be some slight, symbolic adjustment on exchange rate policy after Obama leaves, but not during the visit itself,” Sun said.

“But don’t expect much. The feeling here is, ‘Why should we be the scapegoat for your dollar problems?’ ”

The issue of currencies has sparked testy exchanges in recent days between US and Chinese officials.

China’s Commerce Ministry on Monday rebuffed calls for the yuan to appreciate, signalling resistance to change its foreign exchange policy.

Outside pressure has been building on Beijing to let the yuan rise after more than a year of it being nearly frozen in place against the dollar, with the latest appeal voiced by the head of the International Monetary Fund.

IMF managing director Dominique Strauss-Kahn reiterated the message that China needs a stronger yuan to help rebalance its economy by promoting domestic demand. “It will take time,” he said. “It is not something which will change in one step overnight,” he said.

Reuters

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