U.S. Commerce Secretary Carlos Gutierrez (L) is greeted by Chinese Vice Premier Wu Yi in Beijing March 28, 2006. Gutierrez held talks on Tuesday with Chinese officials. [Reuters]

The yuan strengthened yesterday to 8.0212 against the US dollar, the highest level since its July 21 revaluation. The national currency has appreciated more than 3 percent since then.

Zhou Xiaochuan, governor of China's central bank, said the nation will achieve a balance in its global trade within two to three years by encouraging more imports - and not just by greater foreign-exchange manipulations, according to a posting yesterday on the People's Bank of China Website.

And PBOC spokesman Li Chao said yesterday the yuan will float only in relation to demand and supply in foreign exchange markets and fluctuations in major international currencies.

The Gutierrez talks come on the heels of a visit by US Senators Charles Schumer and Lindsey Graham, who are leading an effort to force trade and currency concessions on China.

China's overall trade surplus rose 217 percent last year to US$101.88 billion. The view that trade imbalances can be cured only by currency adjustments is not accurate, central bank officials implied.

China has taken steps to increase imports, including the purchase of information technology hardware and software, airplanes and construction equipment, according to the PBOC.

In addition, China will continue to rely on imports of soybeans and cotton from international markets to fuel its domestic demand.

In his Website posting, Zhou reiterated a pledge to allow more flexibility in the yuan's exchange rate mechanism.

Under the current managed float system, the central bank allows a 0.3 percent daily trading band around a reference rate.

Last July, China dropped its decade-old peg to the greenback and shifted to a basket of currencies including euros and yen.

Gutierrez met with Commerce Minister Bo Xilai yesterday, but details of their talks were not immediately released.

Chinese and US senior officials vowed yesterday to improve trade ties in a bid to create a "positive atmosphere" for the meeting between Chinese President Hu Jintao and US President George W. Bush in Washington next month.

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