Chinese President Hu Jintao on Monday appeared to reject calls from the United States for an immediate appreciation of his country's currency, telling President Barack Obama in a meeting that domestic economic conditions, and not “foreign pressure”, would inform China's decision.
“Detailed measures for reform should be considered in the context of the world's economic situation, its development and changes as well as China's economic conditions. It won't be advanced by any foreign pressure,” said Mr. Hu, according to a statement released by the Foreign Ministry.
The U.S. says China has artificially undervalued its Yuan currency, which has been kept pegged at around 6.83 to the dollar since mid-2008, to support its exports. While the U.S. says the Yuan's valuation has led to the massive trade deficit between the two countries and global trade imbalances, Chinese officials say restrictive U.S. policies on the import of Chinese machinery are to blame for the gap, a point Mr. Hu reiterated in Monday's talks with Mr. Obama.
“Renminbi appreciation would neither balance Sino-U.S. trade nor solve the unemployment problem in the United States,” said Mr. Hu. The Chinese President did, however, leave open the possibility of an appreciation in the currency in the future. “China will firmly stick to a path of reforming the yuan's exchange rate formation mechanism,” he said, adding that reforms would be made in line with China's own economic and social development needs.
Even within China, there have been growing calls for an appreciation in the Yuan for more balanced development, particularly from the People's Bank of China, the central bank. The Chinese Commerce Ministry, however, remains strongly opposed to any change in currency, arguing it would adversely impact the country's exports. But any appreciation in the Yuan would be timed to ensure the Hu Jintao administration would not be seen domestically as caving in to foreign pressure, say analysts.
The currency issue has emerged as the focus of recent strains between Washington and Beijing. The relationship between the two countries has faced a series of tensions this year, starting with Mr. Obama's decision to approve a $6.4-billion arms sale to Taiwan and following his meeting with the Dalai Lama.