BEIJING // China yesterday has indicated it was ready to revalue its currency as it began two days of talks with US officials on a series of issues. Speaking as the annual US-China Strategic and Economic Dialogue got under way, the Chinese president Hu Jintao indicated his country might allow the appreciation of the yuan the US has been calling for over the past few months.
"China will continue to steadily push forward reform of the [yuan] exchange-rate formation mechanism in a self-initiated, controllable and gradual manner," Mr Hu said. The issue of the yuan's value has dogged US-China relations amid concern that China is keeping the currency at an artificially low level to help its exporters, something that US politicians and manufacturers insist has cost thousands of American jobs.
Timothy Geithner, the US Treasury secretary, and Hillary Clinton, the secretary of state, are leading the US delegation, with the Chinese side including the vice premier Wang Qishan. Mr Geithner welcomed Mr Hu's comments, saying they indicated China understood the importance of revaluation "as an important part of their broader reform agenda". But Chinese officials emphasised that Mr Hu was not indicating a change of policy and said the currency issue was not discussed at the first session of the talks.
Other issues being raised across the table include US concerns over "indigenous innovation" policies that involve a bias in favour of Chinese technology when government contracts are handed out. In his opening remarks, Mr Geithner called for China to adopt "a level playing field" and to end policies he said disadvantaged American companies. On the other side, Beijing is keen for the US to lift controls imposed on the export of some high-tech products to China. These rules require that licences are obtained for the export of civilian technology that could have military applications.
The US commerce secretary Gary Locke recently indicated the number of products covered by the regulations would be reduced, although stricter rules would be imposed on those that remained. US officials have argued that only a tiny proportion of American exports to China are affected by the regulations. Mr Wang, referring to Mr Locke's comments, yesterday said he was pleased at the proposed changes to the rules.
"We hope to hear from the US side in detail [about] a timetable and road map on gradually removing barriers on high-tech exports to China," he added. Chinese officials are also keen for their country to be classed in trade law as a "market economy", because being a "non-market economy" makes it more vulnerable to trade remedy cases related to issues such as anti-dumping measures. But Susan Esserman, a former US deputy trade representative, was quoted in the Chinese press this month as saying she thought it was unlikely China would win market economy status before 2016.
Non-economic issues, including the US desire for China to support a fourth round of sanctions against Iran, are also set to be discussed. Analysts said Mr Hu's comments on the yuan should not be taken as an indication that China is planning an immediate appreciation. Ren Xianfang, a China analyst at IHS Global Insight in Beijing, said there was little new in what Mr Hu said and described his remarks as "just the rhetoric of the Chinese government".
But Ms Ren added the talks and inflationary pressures at home could make it more likely that the currency would be allowed to appreciate, although not straight away. Other observers have suggested the recent plunges in financial markets in Europe may reduce the likelihood of revaluation. "I think China would like to follow its own agenda," Ms Ren said. "It likes to set the pace of revaluation rather than following a schedule set by the US government. That is something it's resisting."
Roger Ludwig, a vice president at Bank Link Asia, suggested there could be many reasons why China would be keen not to revaluate. "You can see the advantage China has in not making this readjustment," Mr Ludwig said. "This is a brutal trade negotiation. There are a lot of things Beijing is being careful on. [Revaluation] opens up a Pandora's box." with Bloomberg business@thenational.ae
