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US urges China to appreciate currency

BEIJING - US Treasury Secretary Henry Paulson said Friday China “agreed” to the need for increased flexibility for the Chinese yuan. “Continued progress and flexibility is important, and the Chinese side agrees,” Paulson told a press conference after two days of economic dialogue, also praising China’s cooperation in dealing with the global financial crisis.

US concerns over the Chinese exchange rate policy were a central feature of the high-level talks, with Paulson stressing “the importance of domestic-led growth, and the importance of a market-determined currency in promoting balanced growth in China.”

The US recognized that currency movements would be “uneven over shorter periods,” but encouraged China to “continue and accelerate” the appreciation and flexibility of its currency, a US fact sheet distributed after the talks said. This week, China’s central bank depreciated the yuan slightly against the dollar, halting a steady trend which saw a 20-per-cent rise of the yuan since 2005, thereby fuelling US criticism that China was making its exports cheaper by using currency manipulation.

While not acceding to US demands, China’s Trade Minister Chen Deming told journalists that his country would not use a weak yuan to prop up exports. At the fifth Strategic Economic Dialogue (SED), which was initiated by Paulson in 2006, China and the US pledged to continue high-level cooperation when president-elect Barack Obama takes office. “China looks forward to continuing candid and pragmatic talks with the new US administration,” Chinese Vice Premier Wang Qishan was quoted as saying by the official Xinhua news agency.

The two sides, after two days of “robust dialogue,” reached an important consensus on how to deal with the global financial turmoil, Paulson said. China and the US agreed to strengthen financial regulation and enhance the role of developing countries in international financial institutions, Wang said. In a move to support trade, both sides pledged 20 billion dollars of credit for financing US and Chinese exports to developing economies.