The U.S. called on China to let the yuan rise before President Hu Jintao’s planned January trip to Washington, setting a deadline for results after Group of 20 leaders failed to reach a broad agreement on currencies.
Hu’s U.S. visit “will be an important time to look at exactly what the quantum of progress has been” on China’s currency reforms, National Security Adviser Thomas Donilon told reporters today in Yokohama, Japan. The pace of the moves is a “sovereign decision” and the U.S. “will certainly be looking.”
The U.S. push for quick action comes a day after President Barack Obama ramped up his criticism of China’s policies, calling the yuan “undervalued” at the G-20 Summit in Seoul. Leaders failed to agree on a remedy for economic imbalances that endanger the global recovery as they clashed over whether Chinese or U.S. policies were more to blame.
“No nation should assume that their path to prosperity is simply paved with exports to America,” Obama said yesterday in a speech at the Asia-Pacific Economic Cooperation forum in Yokohama, which he attended along with Hu after the leaders left Seoul.
The yuan has risen about 3 percent against the dollar since June 19, when China said it was allowing a resumption of appreciation that was frozen in 2008. China has $2.65 trillion of foreign currency reserves, more than double any other country.
“China will continue to improve its currency reform at a steady pace,” Hu told reporters in Yokohama.
China ran up a $201 billion trade surplus with the U.S. in the first nine months of this year, more than the U.S. deficit with the next seven-largest trading partners combined, Commerce Department data show.
Chinese policy makers say the Federal Reserve’s monetary easing policy poses risks for global financial stability. More capital inflows to the region will fuel asset bubbles and inflation, Jin Zhongxia, a deputy director general of the international department at the People’s Bank of China, said yesterday.
“Major reserve-currency issuing countries excessively print money to get out of their own economic difficulties, posing a policy dilemma for emerging economies,” Jin said in Macau, without naming any countries.
The G-20 said emerging markets facing a surge of capital inflows can adopt regulatory steps to cope, offering them cover to limit currency swings as the U.S. adds $600 billion of liquidity. The group’s finance ministers will work next year on a set of “indicative guidelines” designed to identify large economic imbalances and how to fix them, according to a joint statement released at the Seoul summit.
“We averted, hopefully, a currency war,” Mari Pangestu, trade minister for Indonesia, a G-20 member, said in an interview with Bloomberg Television. Currency issues “cannot be solved bilaterally or unilaterally,” she said.
Obama and Hu were among 21 leaders meet at APEC in Japan following two days of talks at the G-20 summit.
The yuan declined 0.2 percent to 6.6370 per dollar as of 5:30 p.m. two days ago in Shanghai, even after the People’s Bank of China set the reference rate at 6.6239, the strongest level since a peg ended in July 2005, according to the China Foreign Exchange Trade System. The currency has climbed 0.3 percent in the past five days, the second weekly gain.
Some Japanese business leaders have backed China’s currency approach on grounds that an abrupt change could send ripples through the global economy.
“China’s current policy of moving gradually, carefully, step by step to a more flexible exchange rate regime is really the right idea,” Junichi Ujiie, chairman of Keidanren, Japan’s biggest business lobby, said in an interview with Bloomberg Television yesterday. Moving quickly would “cause confusion in China’s economy, which is going to be really hard for the global economy.”