President Hu: US woes not yuan-related

China follows a responsible exchange rate policy, Hu told Obama as the two leaders met during the Asia-Pacific Economic Cooperation summit in Hawaii.

China will steadily advance the reform of the exchange rate mechanism, Hu said, with the goal of ensuring a market-based and managed floating exchange rate system that is tied to a basket of currencies.

Stressing that the exchange rate is not to blame for US structural problems, Hu warned that even an abrupt yuan appreciation could not solve the problems the US is facing.

Instead, Hu said, the US should loosen export controls on high-tech products to China and make it more convenient for Chinese firms to invest in the US.

Hu’s remarks came against a backdrop of some US politicians blaming the exchange rate for the trade deficit with China. They claim that the exchange rate has been kept low in order to maintain trade advantages.

Officials in Beijing have consistently said that considering the huge amount of trade involved, friction is inevitable and problems need to be addressed through dialogue rather than being politicized.

The yuan reached 6.3165 to the US dollar on Nov 4, the highest level since the 2005 yuan revaluation.

Since then the yuan has appreciated by more than 30 percent as China ceased pegging its currency to the dollar.

However, trade between China and the US has remained steady, which shows that the trade surplus with the US was mainly a result of robust overseas demand rather than the currency issue, said Zhang Jianping, senior researcher at the Institute for International Economic Research under the National Development and Reform Commission.

“Reform of China’s currency regime is conducted in a gradual and controllable way to allow export-reliant enterprises to predict future patterns. Otherwise, a large number of companies will shut down and cause huge damage to the economy,” Zhang said.

Maintaining China’s economic growth is also a massive contribution to the beleaguered global economy, he said.

The trade deficit between the two countries is due to the transfer of manufacturing capabilities and differing labor costs, he said.

Commerce Minister Chen Deming also said that the exchange rate is at a basically reasonable level and adjusting it will not solve the US trade deficit with China.

Chen made the comment on Friday in a meeting during the APEC summit with US Commerce Secretary John Bryson and Democrat Congressman Jim McDermott from Washington.

The US is ready to work with other countries to overcome the current difficulties in the global economy and push for strong, sustainable and balanced growth around the world, Obama said during his meeting with Hu.

“China and the US will remain a very complicated relationship because the pattern of trade is very complicated, but in the long run it will be beneficial,” said Richard Boucher, deputy secretary-general of the Organization for Economic Cooperation and Development.

Both Hu and Obama stressed the importance of enhancing cooperation in the Asia-Pacific region.

Hu said it’s “the sole correct choice” for China and the US to enhance communication and coordination amid the severely challenging world situation, and the Asia-Pacific region should be the key area for cooperation.

This is their ninth meeting since Obama assumed office in early 2009. It took place as the US shifts its economic and diplomatic focus eastward to make the Asia-Pacific region its strategic base.

China respects the legitimate interests of the US in the Asia-Pacific region, and welcomes the US to play a constructive role in regional affairs, Hu said.

Yet China also hopes that the US will respect China’s legitimate interests in the region and properly manage matters of major concern for each side by promoting regional peace and cooperation, Hu said.

The crux of the China-US partnership is to respect each other’s key interests, Hu said.

He called on the US to faithfully follow the principles stated in three China-US Joint Communiques, and properly handle related issues with discretion, Hu said.

What Hu said on respecting each other’s key interests will be important principles for China and the US to enhance mutual trust, said Tao Wenzhao, a senior fellow at the Institute of American Studies at the Chinese Academy of Social Sciences.

The meeting between Hu and Obama was a part of the mechanism of frequent high-level exchanges which were agreed after Hu’s visit to the US at the beginning of the year. Though there have been ups and downs, the mechanism has worked well, Tao said.

In Hu’s last visit, the countries agreed to establish a cooperative partnership.

“Lack of strategic mutual trust is one of the biggest problems to achieve that goal. Now that he once again made it clear to the US that China will not do any harm to the interests of the US, we hope that the US can really start cooperation that benefits all,” Tao said.

Obama agreed in the meeting with Hu that strengthening cooperation between the US and China is vital to the two countries and to the Asia-Pacific region and even the world.

He said that the US welcomes a stronger, successful, prosperous and stable China to play an even greater role in international affairs, emphasizing that the US respects the rightful interests of China in the Asia-Pacific region.

Obama also said that the US respects the sovereignty of China and the US is glad to see continuous progress made in relations across the Taiwan Straits and supports both sides of the Straits to continue to seek stability and reconciliation. The US will continue to pursue the one-China policy based on the three China-US Joint Communiques and will never support “Taiwan independence”, Obama said.

Hu arrived in Honolulu with other Asia-Pacific leaders to attend the annual Asia-Pacific Economic Cooperation Leaders’ Meeting over the weekend.