Hu Tells Obama China Will Follow Its Own Path on Yuan (Update2)
By Edwin Chen and Rob Delaney
April 13 (Bloomberg) -- President Barack Obama urged China to move toward a “more market-oriented exchange rate” and President Hu Jintao told him the country wouldn’t yield to “external pressure” in deciding when to adjust the yuan.
Any currency revaluation by China must be “based on its own economic and social-development needs,” China’s official Xinhua news agency cited Hu as saying in yesterday’s meeting with Obama in Washington. Yuan forwards fell the most in three weeks as the remarks spurred speculation the currency won’t resume gains in the short term.
Obama also expressed “his concern” about some “market- access barriers in China,” Jeff Bader, senior director for Asia at the National Security Council, told reporters after the meeting, held as world leaders gathered to discuss nuclear security.
U.S. lawmakers say the yuan peg, fixed at about 6.83 to one dollar since July, 2008, gives Chinese exporters an unfair advantage and they have been urging the Obama administration to put more pressure on China to change the policy. The two leaders’ comments left each country room to maneuver and didn’t foreclose action on China ending the peg, said Kenneth Lieberthal, who held Bader’s job under President Bill Clinton.
“Hu could have said that China feels its exchange rate is now at the right level and will not change it; he did not say that,” said Lieberthal, now a China scholar at the Brookings Institution in Washington.
‘Wiggle Room’
By saying China would adjust exchange rates based on its own needs, Hu left the matter “wide open,” Lieberthal said. “Hu’s left himself a lot of wiggle room.”
Twelve-month non-deliverable forwards declined 0.2 percent to 6.6375 per dollar as of 3:49 p.m. in Hong Kong, the biggest loss since March 22, according to data compiled by Bloomberg. The contracts reflect bets the currency will strengthen 2.8 percent from the spot rate of 6.8261.
“The comments may ease speculation the yuan will rise in the short term and prompt traders to buy dollars in the NDF market,” said Liu Dongliang, a Shenzhen-based foreign-exchange analyst at China Merchants Bank Co., the country’s fifth-largest lender by market value. “We still need to watch for some time to find out whether the appreciation will really come later than expected.”
Yuan Appreciation
China may allow the yuan to appreciate by June 30 to curb inflation while avoiding a one-time jump in value that might curb exports, a Bloomberg survey of analysts showed.
Hu’s comments suggest the yuan will be revalued in “coming months,” especially because Treasury Secretary Timothy Geithner can’t indefinitely delay a report originally due on April 15 that may label China a currency “manipulator,” said Huang Yiping, a professor at the China Center for Economic Research at Peking University.
“The exact time I don’t know, but I think it won’t take a very long time given that there are so many things coming up,” said Huang, a former chief Asia economist for Citigroup Inc.
During their meeting, Obama also made clear the “sense of urgency” on dealing with Iran’s nuclear ambitions, and the Chinese said they will work with the U.S. on United Nations sanctions, Bader told reporters.
Iran Sanctions
Obama underscored that Iran “must meet its international nuclear nonproliferation obligations,” and both presidents agreed to instruct their delegations to work with the UN Security Council on a sanctions resolution.
“The Chinese are very clear they share our concern about the Iranian nuclear program,” Bader said.
“The resolution will make clear to Iran the cost of pursuing a nuclear program that violates Iran’s obligations and responsibilities,” Bader said. “The discussion was a sign of international unity on Iran. The Chinese are actively at the table.”
In Beijing, Chinese Foreign Ministry Spokeswoman Jiang Yu wouldn’t say whether China would now back sanctions. She repeated China’s position that “dialogue and negotiations are the best way” to resolve the issue.
“Pressure and sanctions cannot fundamentally solve it,” Jiang told reporters at a regularly scheduled press conference.
Lieberthal said in a telephone interview from Beijing the signals from China seemed positive.
‘Serious Negotiation’
“In coming to the summit, President Hu affirmed that China is into a serious negotiation on an Iran sanctions resolution,” he said. “It doesn’t tell you yet how supportive China will be and what its bottom line will be. So there’s still a lot to cover. But the fact that they are seriously engaged on this is certainly a lot of better than if they had shunned the process.”
Bader described the two leaders’ talks about the global economic recovery and nuclear nonproliferation as “positive” and “constructive.” They agreed that “concrete actions” are needed on these issues, Bader said.
Hu said good economic relations between the two countries are essential to maintain growth.
“The U.S. and China are both facing the arduous tasks of promoting economic growth, increasing employment and changing the economic mode of development,” Xinhua cited Hu as saying. “In this context, we must increase cooperation, and together maintain the stability of the international economic and financial situation.”
No comments:
Post a Comment