China fends off Obama criticism on currency policy

BEIJING, Oct 30 (Reuters) - China fended off U.S. presidential candidate Barack Obama's criticisms of its currency policies and trade surplus, while stressing that it wants to work with whoever wins the White House.

Democratic contender Obama said in a letter released on Wednesday that China's yawning trade surplus with the United States is "directly related to its manipulation of its currency's value".

Obama, riding high in pre-election opinion polls, said China should change its foreign exchange and other policies to rely less on exports for growth, and said he would use "all diplomatic means" at his disposal to press Beijing for those changes.

Responding to a question about Obama's call, Chinese Foreign Ministry spokeswoman Jiang Yu avoided direct criticism of him but said his claims were unfounded.

"The renminbi exchange rate is not the fundamental cause of the deficit in China-U.S. trade," she told a regular news conference. She said an array of global economic forces, including shifts in the international "industrial division of labour", had contributed to the imbalance.

"We're willing to appropriately handle problems in China-U.S. trade on a basis of equal, mutually forebearing and friendly consultation," she said.

China's exchange rate with the United States is a festering complaint of many U.S. manufacturers in textiles and other sectors that have been hit by rising competition. They say Beijing deliberately undervalues its currency to boost exports.

The Bush administration has pressured Beijing to raise the value of its currency, with some success. But it has refused to formally declare China a currency manipulator, which would open the way to tougher policies to pressure Beijing.

The U.S. trade deficit with China hit a record $256.2 billion in 2007.

But China has been wary of embroiling itself in pre-election controversies, and Jiang stressed her government wanted smooth sailing whether it is Obama or Republican John McCain who wins next week's vote.

"The U.S. election is its own domestic affair," said Jiang. "We hope and believe that no matter who wins he will attach importance to China-U.S. relations." (Reporting by Chris Buckley; Editing by Sanjeev Miglani)