China's Hu prods West on trade, investment barriers

SINGAPORE (Reuters) - Chinese President Hu Jintao called on Friday for an end to "unreasonable" trade restrictions on developing countries, just days ahead of a U.S. presidential visit to his country that has been clouded by economic tensions.

In a speech to business and political leaders in Singapore, Hu made no mention of the Chinese yuan, a hot topic in global financial markets given the growing pressure from Washington for Beijing to revalue the currency.

Arguing that protectionism stood in the way of a global economic recovery, he called for a push to conclude the Doha round of trade liberalization talks, which have been stalled for eight years.

"The inherent problems of the international economic system have not been fully addressed and a comprehensive world economic recovery still faces many uncertainties and destabilizing factors," Hu said in a 20-minute speech.

"We must continue to promote trade and investment liberalization and facilitation and oppose protectionism in all its manifestations, particularly the unreasonable trade and investment restrictions imposed on developing countries."

Strains over trade between the economic giants could be a focus during U.S. President Barack Obama's visit to China, which starts on Sunday, after Washington slapped duties on Chinese-made tires and followed up last week with action on oil well pipes.

Obama arrived in Japan on Friday, the first leg of a tour that will take him to the Asia Pacific Economic Cooperation (APEC) summit over the weekend, then China and South Korea.

INVESTMENT BLOCKS

The 21 leaders of APEC, which accounts for more than half of global output and 40 percent of world trade, will agree to stick with economic stimulus policies until "a durable economic recovery has clearly taken hold," according to a draft declaration to be issued at the end of the summit.

Hu's reference to investment restrictions comes after years of efforts by Chinese state-owned firms to make resource investments in the United States, Canada, Australia and Chile, many of which have been blocked by labor opposition and national security concerns.

Bilateral ties with Australia have been under particular strain because of Canberra's opaque process for vetting foreign investments, with some high-profile deals falling through before a decision was reached or after strict conditions were imposed.

Hu's comments are likely to be seen as a riposte to pressure from the U.S. administration on its currency, which says an undervalued yuan is one factor contributing to imbalances between the world's leading and third-biggest economies.

Obama has said he will raise this issue on his visit to China, which has effectively pegged the yuan against the dollar since mid-2008 to cushion its economy from the global downturn.

China's central bank said earlier this week that it will consider major currencies in guiding the yuan, suggesting a departure from the peg.

The country then signed up at the end of a meeting of Asia Pacific finance ministers in Singapore on Thursday to a statement that promised "monetary policies consistent with price stability in the context of market-oriented exchange rates."

"NO INDICATIONS" OF A YUAN MOVE

However, Thailand's finance minister threw cold water on talk that all this could signal a policy change was on its way.

Speaking in the Dealing Room, a Reuters Messaging chatroom, Korn Chatikavanij said that at the finance ministers' meeting there had been "no indications from China on when and if there will be a move on the currency."

The International Monetary Fund's managing director, Dominique Strauss-Kahn, added his voice to the debate on Friday, saying that most Asian currencies were undervalued and reiterating calls for the yuan to be revalued.

"China's economy in the coming years will be focused on domestic growth and the value of renminbi will have to be increased," he told a news conference at the Asia Pacific Economic Cooperation (APEC) meeting in Singapore.

Strauss-Kahn said the pace of the recovery in the U.S. economy remained sluggish but he did not believe there would be a double-dip recession. In October, the IMF raised its U.S. growth outlook to 1.5 percent in 2010 but Strauss-Kahn said that forecast could turn out to have been on the pessimistic side. Business and political leaders at the meeting agreed on Friday that their countries must closely coordinate the unwinding of stimulus packages to keep asset bubbles under control and to avoid derailing a fragile recovery in consumer confidence.

"The moment will have to be coordinated so that countries come out in an orderly sort of way," Singapore Prime Minister Lee Hsien Loong told business executives.

The spending part of stimulus packages, some $2 trillion worth around the Asia-Pacific region alone, is easier to unwind, Lee said "because you can gradually tail off the spending and you can watch whether the economy is growing again."

More difficult is winding back the expansionary monetary policies now in effect in much of the world.

"If you withdraw the monetary stimulus too late you risk inflating a bubble," Lee said.

(Writing by John Chalmers; Editing by Bill Tarrant)