January 13, 2011 / 8:08 AM / 7 years ago

China seen to be cool on U.S. trade-for-yuan deal

BEIJING (Reuters) - China will cast a sceptical eye over a U.S. offer to free up trade in high-tech goods and will refuse to be drawn into a bargain to speed up appreciation of its yuan currency, Chinese government advisers and economists said on Thursday.

U.S. Treasury Secretary Timothy Geithner said on Wednesday that Washington was “willing to make progress” in giving China greater access to the American market and high-tech goods, provided that it saw some give from Beijing on its tightly controlled exchange rate regime.

Chinese officials declined to comment on Geithner’s idea, made ahead of Chinese President Hu Jintao’s visit next week to the United States, but a series of advisers and analysts said that it was unlikely to jump at a trade-for-currency deal.

“China has never thought about yuan appreciation from such a perspective,” said Ding Yifan, deputy head of the World Institute in the Development Research Center, a think-tank under the State Council, or cabinet.

“The Chinese yuan will not rise in a way designed by the United States. Yuan appreciation is a general trend. It is not because the United States wants it,” he said.

The pilfering of U.S. intellectual property is the main reason for the curbs on exports of high-technology products that China consistently demands Washington remove.

Washington may, in fact, be too slow in opening the door to American technology, said Tao Xie, an expert on U.S.-China relations at the Beijing Foreign Studies University.

He noted that a parade of top Chinese officials had visited Western Europe in recent months and appeared to be making inroads there in gaining access to high-tech goods.

“That means we may not need to make major concessions to Washington about the currency,” he said. “If China can get the same level of technology and equipment from Western Europe, why should it bother with the United States?”


China has guided the yuan up by 0.4 percent against the dollar this week, following a well-established pattern of nudging up the currency’s value before important political meetings.

With China’s trade surplus hitting nearly $200 billion last year and inflation running at its fastest in more than two years, economists believe that more yuan appreciation is needed over the coming year.

“We know that the government has pledged to put the task of fighting inflation at the top of its agenda this year,” said Lu Zhengwei, senior economist at Industrial Bank in Shanghai.

“As more and more Chinese households own cars, the impact from higher international crude oil on inflation expectations has increased sharply. I think this is the most important factor behind the sharp appreciation in recent days,” he said.

Politics aside, Stephen King, chief economist at HSBC, said China may not want the yuan to strengthen too much as that would be financially costly, shrinking the value of its $2.85 trillion in foreign exchange reserves, the world’s largest stockpile.

“A renminbi revaluation is also, by definition, a dollar devaluation,” King told reporters at a briefing in Beijing, using the official name for the yuan.

“As the dollar falls a long way against the renminbi, that means that China’s foreign exchange reserves in renminbi terms will be worth a lot less.”

Additional reporting by Koh Gui Qing; Writing by Simon Rabinovitch; Editing by Kim Coghill

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