Hu's stress on independent decision-making on valuation

Chinese President Hu Jintao on Monday pledged to reform China's exchange-rate mechanism, but gave no commitment to revaluing his country's currency at the start of a two-day dialogue with the United States.

China's valuation of the Yuan, which the U.S. says has been kept artificially low, would only be decided “under the principles of independent decision-making, controllability and gradual progress,” said Mr. Hu, suggesting China would, in the near-term, ignore U.S. calls for its appreciation. China's currency, along with the rising tensions in the Korean peninsula, is at the centre of attention this week as more than 200 officials from the U.S. — the largest-ever delegation from Washington to Beijing — discuss strategic and economic issues with their Chinese counterparts.

At the start of the annual dialogue, Mr. Hu made no reference to the crisis in North Korea, amid increasing calls for sanctions following a March 26 torpedo attack on a South Korean warship that left 46 dead. He did, however, promise visiting U.S. Secretary of State Hillary Clinton Chinese support in “managing regional hot-spots”.

Ms. Clinton, ahead of her meeting with Chinese State Councillor Dai Bingguo, described the North Korean situation as “precarious”, on a day when South Korea announced it would refer the incident to the United National Security Council (UNSC) and expand economic sanctions, including stopping two-way trade. But any substantial international response, analysts say, would require Chinese support, given the North's heavy reliance on Beijing for both financial support and food aid. China has, in the past, remained reluctant to impose as heavy sanctions as the U.S. and South Korea have sought, concerned by instability in its neighbour and maintaining a historically-close strategic relationship.

Ms. Clinton is expected to push for greater Chinese support for a concerted international response and at the UNSC in talks on Tuesday.

“This is a highly precarious situation that the North Koreans have caused in the region, one that every country that neighbours or is in proximity to North Korea understands must be contained,” she said.

While U.S. officials said they remained hopeful of securing Chinese support, there were few expectations of reaching an understanding over the other significant source of tension in the bilateral relationship — the Yuan's valuation. Following Mr. Hu's remarks, U.S. Treasury Secretary Timothy Geithner, who will hold talks with Vice-Premier Wang Qishan, made no reference to the currency issue, suggesting the U.S. would likely focus more on other pending trade disputes. The Yuan also found no mention in Monday's working dialogue, said officials.

Mr. Geithner said the U.S. would press for greater openness in China's market for American firms. China, for its part, has called for easing restrictions on the export of high-tech equipment to China.

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