China rejects US pressure on currency

Fairfax Media

POLITICAL PRESSURE: China has rejected US calls to ease currency controls.

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China has rejected US calls to ease currency controls and said criticism would not help efforts to end the global crisis.

A Commerce Ministry spokesman repeated Chinese complaints that Washington was acting unreasonably by expecting other countries to raise their value of their currencies in order to boost US exports.

The United States and other trading partners complain Beijing keeps the yuan undervalued and are pressing for it to rise.

"Politicising the exchange rate issue is not helpful to coordination among all parties in the course of fighting the global financial crisis," spokesman Yao Jian said at a news briefing.

A group of 130 US lawmakers wrote to President Barack Obama on Monday demanding that he take action, adding to pressure ahead of an April report in which the US Treasury has the option of declaring Beijing a currency manipulator.

That would set the stage for a complaint to the World Trade Organisation and possible sanctions.

On Sunday, Premier Wen Jiabao denied the yuan was undervalued and said foreign pressure was unhelpful.

He said Beijing planned to reform its exchange rate system but the currency will be kept at a "stable and balanced" level.

Yao rejected suggestions the yuan's exchange rate was to blame for the Chinese trade surplus or the US trade deficit with China.

Critics say the yuan is undervalued by up to 40 per cent, giving China's exporters an unfair price advantage.

"It is groundless to talk about this based on China's trade surplus or the US deficit or the fact that the US economy has not recovered yet," Yao said.

He noted China runs trade deficits with Japan and South Korea but is not pressing them to narrow the gap by making their currencies more expensive.

"We hope the United States will overcome the financial crisis and become an advocate of free trade, not an obstructionist," Yao said.

"We hope it will think of its own interest, and it shouldn't ask others to appreciate (their currencies) to expand its own exports."

Beijing has held the yuan steady against the dollar for 18 months to help its exporters compete amid weak global demand.

Analysts expect the government to allow the yuan to rise gradually in the second half of the year, but they say Chinese leaders might wait in order to avoid looking like they gave in to US pressure.

- AP