Chinese President Hu Jintao rebuffed U.S. calls to revalue China's currency, telling President Barack Obama that any tinkering Beijing does with the yuan will be done in accord with domestic interests.
Hu defended China's policy of pegging the yuan to the dollar at a Monday meeting with Obama in Washington and said changes to the exchange rate would not come from U.S. pressure.
"Detailed measures for reform would 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," Hu said in remarks China's Foreign Ministry released on Tuesday. He said reform would come based on China's "own economic and social development needs."
China's currency has emerged as prominent friction in a relationship already troubled by disputes over trade, U.S. arms sales to Taiwan, and Obama's meeting with Tibet's exiled leader, the Dalai Lama.
With high unemployment persisting in the United States, Congress has been pressuring the Obama administration to punish China for the yuan-dollar peg — a tactic which economists say keeps the currency undervalued and gives Chinese exports an unfair advantage.
Hu told Obama that a rise in the value of the yuan, also known as the renminbi, would not solve U.S. economic ills. "Renminbi appreciation would neither balance Sino-U.S.. trade nor solve the unemployment problem in the United States," Hu said, according to the remarks.
He reiterated his government's standing line that China did not intentionally seek a trade surplus with the with U.S. and would buy more goods if Washington relaxed controls on exports of high technology goods.
White House national security aide Jeffrey Bader said Obama reiterated his view that there needs to be "a more market-oriented exchange rate."
Despite Hu's statements, many economists and financial analysts believe China will revalue the yuan in the second or third quarter this year. Options include a one-off revaluation or resuming a slow appreciation of the currency.
Beijing used a combination of the two — a one-off revaluation followed by a crawling appreciation — in 2005 when it ended a decade long yuan-dollar peg. But China reverted to the peg in mid-2008 worried about the impact on its exports as the economic crisis took off in the U.S.
The yuan was only one of several issues Obama and Hu discussed — Iran's nuclear program chief among them. Bader described the meeting as "positive and constructive" and the presidents are "familiar and comfortable with each other."
In recent weeks, Washington and Beijing have sought to relax tensions that crept into relations late last year after the arms sales and contentious negotiations on climate change. Particular attention has been paid to trying to make discussions of the yuan less heated. U.S. Treasury Secretary Timothy Geithner, on his way home from India, stopped in Beijing last week for a 75-minute discussion with Vice Premier Wang Qishan.
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