Analysis: Currencies discussed in cordial mood

13:46, April 13, 2010      

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U.S. President Barack Obama repeated his call for extended yuan flexibility during a meeting Monday with China's President Hu Jintao, deploying careful diplomatic language while Beijing stressed dialogue.

A later report from China's official Xinhua news agency reflected an uncompromising tone from President Hu, but in Washington there was a deliberate effort by both sides to stress the cordial nature of the bilateral talks.

"The president reaffirmed his view that it is important for a ... sustained and balanced global economic recovery that China move toward a more market-oriented exchange rate," Jeffrey Bader, a top White House adviser, told reporters.

The U.S. Treasury recently delayed publication of a report that U.S. politicians had urged Obama to name China a so-called"currency manipulator," in Washington's purpose to ratchet up pressure on Beijing to let its currency gain value.

Months of unnerved tensions between the two giant countries, following Obama's announcement of $6.4 billion arms sale to Taiwan in late January, placed heavy expectations on the 90-minute talks on the sidelines of Obama's nuclear security summit, analysts said.

"Most importantly, it seems that the atmospherics surrounding the bilateral U.S.-China relationship have improved, opening the door for movement on a number of issues," said China expert Drew Thompson of the Nixon Center in Washington.

Meanwhile, foreign currency investors will scrutinize Obama's and Hu's words for evidence of a shift in Beijing's yuan policy.

Analysts say a relaxation of the currency peg makes sense for China in the long term, but they do not expect significant changes in the immediate future.
A Chinese official in Washington characterized the two leaders' discussions as "positive and constructive".

Chinese spokesman Ma Zhaoxu said Hu told Obama the two nations "should properly resolve economic and trade frictions through consultations on an equal footing and jointly uphold the larger interests of China-US economic cooperation.

Xinhua news agency later reported President Hu had told his American counterpart that Beijing would "firmly stick" to its own path on the yuan. Hu also noted that yuan appreciation would neither balance Sino-U.S. trade, nor solve the U.S. unemployment problem.

That stance was no surprise to analysts who say that public U.S. lecturing on the currency, and threats of punitive tariffs by U.S. lawmakers, only make China dig in against policy changes that even Chinese economists say are overdue.

"The Chinese want the exchange rate change to be theirs," said economist Derek Scissors of the Heritage Foundation.

"They are not going to do anything at all to tip it to the U.S. and thus give the impression of successful U.S. pressure." he said.

Xinhua quoted Hu as saying China wants to increase its U.S. imports, especially of high-tech products.

In a carefully nuanced message, Obama has said a more market-orientated yuan would provide an essential aid to global rebalancing, and help the world economy grow on an even tier.

People's Daily Online / Agencies


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