President Hu pledges currency reform

08:12, May 25, 2010      

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China on Monday pledged to push ahead with currency reforms but only at its own pace, and pressed for an end to US curbs on high-tech exports.

President Hu Jintao made the remarks on the currency at the start of the two-day China-US Strategic and Economic Dialogue (S&ED), where high-level officials began wide-ranging talks on financial market reforms, trade and reviving global growth.

"China will continue to steadily advance the reform of the formation of the renminbi exchange rate mechanism under the principle of independent decision-making, controllability and gradual progress," Hu said.

US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner sat onstage behind him at the Great Hall of the People. They are leading a delegation comprising about 200 officials to Beijing for the talks.

China has kept the yuan pegged at a rate of about 6.83 to the dollar since mid-2008, after the currency gained 21 percent from 2005 to 2008.

Although both sides are "low-profile" on the matter, "Hu's words send a message that China is considering the issue seriously. There is a high possibility that China will allow the yuan to rise during the third quarter", said Dong Xian'an, chief economist at Industrial Securities.

Geithner said the US welcomes the fact that "the Chinese leadership has recognized the reform of the foreign exchange rate mechanism is an important part of the broader reform agenda".

In a separate session with Geithner, Vice-Premier Wang Qishan pressed for an end to export controls on "dual use" technology with possible military applications.

"During this dialogue, we hope to hear from the US side in detail its timetable and roadmap for gradually removing barriers to hi-tech exports to China," he said.

Washington is reviewing its export controls, which are meant to deny China's military access to technology that might aid its modernization. They apply to goods such as supercomputers, lasers, navigation systems and high-performance materials used in missiles.

US Commerce Secretary Gary Locke said earlier the review of the system was expected to be completed by summer and Washington would then decide whether to relax the controls.

"China is pleased to note the US initiatives to relax export controls," Wang said.

Minister of Commerce Chen Deming also urged the US to translate words into action in easing export restrictions.

The US contributed 7.5 percent of China's hi-tech imports last year, down from 18.3 percent in 2001 partly due to the export controls, the ministry said.

But Kevin Griffis, a spokesman for the US Commerce Department, said "the impact of export controls on hi-tech trade with China is extremely small", Bloomberg reported.

According to the US Commerce Department, of the $63.4 billion in US exports to China in 2009, only 0.3 percent required a commerce license, and fewer than 2 percent of all such license applications to China were denied.

Wang Fan, director of the institute of international relations at China Foreign Affairs University, said the S&ED marked "a beginning for the US to relax meaningless export controls".

"Some restrictions are totally unnecessary. If the US insists on them, its foreign trade will be harmed," the expert said.

Wang Qishan also urged the US to give "equal treatment" to Chinese enterprises investing in the US and accord China market economy status. He expressed hope that the US will take "concrete measures" to curb trade protectionism.

Geithner, too, on Monday emphasized US concern over equal market access.

"We are asking that China give American firms the same opportunities to compete in China that Chinese companies enjoy in the United States," Geithner said.

At a press conference after the first day of talks, Zhou Xiaochuan, governor of the People's Bank of China, the central bank, said the government will "press ahead" with financial reforms.

He also said China and the US have agreed to work together to support Europe's efforts in overcoming the continent's debt crisis.

The two sides reached consensus that the European debt crisis has "added uncertainties" to global economic recovery, and both China and the US must be "cautious" on exiting from their stimulus packages.

"The general view was that the pace of the global economic recovery will be basically sustained," Zhou said.

In a letter to participants, US President Barack Obama said the dialogue was important as it would allow the countries to "understand one another better", particularly on issues over which they disagree, such as Taiwan and Tibet.

But in his remarks, Hu said both countries should "respect each other's core interests".

"To the Chinese people, nothing is more important than safeguarding national sovereignty and territorial integrity. I trust it is not difficult for the American people, who went through the American civil war, to understand how important and valuable unity is to a nation."

Source:China Daily


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