Washington, DC, United States (AHN) – Chinese President Hu Jintao, who will arrive in the U.S. on Tuesday for a state visit, refused to even accept Washington’s explanation of American economic woes, completely ignoring a U.S. demand for an appreciation of the Chinese currency.
Hu negated the concerns expressed by U.S. officials including Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton about China’s need to strengthen the “substantially undervalued” yuan because it puts other countries at a competitive disadvantage.
According to calculations with inflation counted in, the yuan is rising at a rate of about 10 percent a year, causing Geithner to add, “so if that appreciation was sustained over time, it would make a very substantial difference.”
Cautioning that China faces inflation problems that could lead to global concerns, Geithner said, “China presents enormous economic opportunities for the United States and for the world, but its size, the speed of its ascent, and its policies are a growing source of concern in the United States and in many other countries.”
Hu shrugged off these inflation related concerns, saying inflation was not the main pointer in assessing yuan’s value. He noted that a mechanism has been set to take care of fluctuations of the Chinese currency.
Speaking on U.S.-China relations at the state department last week, Hillary Clinton reiterated Secretary Geithner’s comments.
Clinton said,”China still needs to take important steps toward reform,” and urged China to allow its “currency to appreciate more rapidly.”
“These reforms, we believe, would not only benefit both our countries, but contribute to global economic balance, predictability, and broader prosperity,” she added.
According to media reports citing answers submitted to written questions from The Wall Street Journal and the Washington Post, Hu noted trade, energy and terrorism as areas for cooperation, cautioning the U.S. to “respect each other’s sovereignty, territorial integrity and development interests.”
The battle of words began last year when President Barack Obama, during a hectic schedule in New York, described the yuan exchange rate as a “real issue” and called for Beijing to let the yuan rise.
The following day at a dinner event hosted by the National Committee on U.S.-China Relations and the U.S.-China Business Council, Chinese Premier Wen Jiabao, who is responsible for managing the Chinese economy, the world’s second-largest behind the United States, told his audience, “If the renminbi [yuan] appreciates by 20 percent to 40 percent according to the requests of the U.S. government, we do not know how many Chinese companies will go bankrupt and how many Chinese workers will be laid off and how many rural workers will go back to homes and there will be major turbulence in the Chinese society.”
Even after Obama had spent most of a two-hour meeting with the Chinese premier in New York pressing for a stronger yuan, according to White House officials privy to the meeting, Wen later told journalists that “common interests far outweigh our differences” and that despite “disagreements of one kind or another between our two countries, the differences can be resolved.”
In the global economy, the West has criticized China for months for keeping the yuan at an exceptionally low value, claiming Beijing enjoys an advantageous position due its manipulated lower yuan value, as it makes Chinese exports cheaper.
China abandoned a fixed exchange rate to the dollar in June, but the present exchange rate is controlled by the People’s Bank of China, which sets a daily rate.
The dispute is now that Beijing has allowed the yuan to appreciate only 1.9 percent since abandoning the peg.
According to White House sources, although the currency exchange rate will be high on the agenda, the Obama administration will continue to follow a softer diplomatic route.
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