Bilateral meet to discuss high-tech export controls, protectionism
BEIJING - China's currency policy is unlikely to be a major issue at next week's high-level dialogue between Chinese and the US officials as pushing too hard over yuan appreciation would do little to break the stalemate, a central bank adviser said.
"Despite mounting pressure for a stronger yuan in the past few months, officials from both sides are expected to play down the currency issue during the meeting, leaving more leeway for China to decide the fate of its own currency," Li Daokui, a member of the central bank's monetary policy committee, told China Daily on Wednesday.
In the latest round of the Strategic and Economic Dialogue (SED) between China and the United States slated for next week in Beijing, top Chinese officials will meet their American counterparts, led by US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, to discuss issues such as trade and energy cooperation.
China came in for a lot of flak earlier this year over the value of its currency, but Li, who is also a professor at Tsinghua University, said the US now seemed less compelled to press China over yuan appreciation, as it is eyeing a broader cooperation framework with China.
US Commerce Secretary Gary Locke, who will attend next week's bilateral meeting, is currently leading a US trade mission to China to boost clean energy technology sales, a major area in which the US wants to make a breakthrough in China.
"In this round of high-level talks, the US is expected to set aside its concerns on the yuan for a while, and will strive to seek bigger returns from the world's largest market for clean energy," said Sun Lijian, a finance professor at Fudan University.
Li said that as the pressure for yuan appreciation is abating, the Chinese government would reform the currency regime at its own pace without bowing to foreign pressure. But he refused to reveal how the yuan's exchange rate would move in the near future.
Derek Scissors, a research fellow at the Heritage Foundation in Washington, said the recent sharp decline of the euro against both the dollar and the yuan will push China and the US into being less flexible on currency.
"China will argue that this is a bad time to change policy, which is quite reasonable," he said.
The euro has dropped some 7 percent against the dollar in the past month on concerns over the European sovereign debt crisis, leading to further volatility on global financial markets.
China has pegged its currency against the dollar since mid-2008 in an effort to protect its exporters from the fallout of the global financial crisis.
Wang Tao, chief China research economist at the UBS Securities, said in a research note that the sovereign debt crisis in Europe has increased uncertainty across the board, which may mean China is more hesitant to let the yuan rise for the moment.
"Provided that financial markets stabilize in the next few weeks, we expect China to start the yuan move within the next couple of months," she said.
Mark Weisbrot, co-director of the Center for Economic and Policy Research, said that China seemed to have some interest in yuan appreciation in order to "keep inflation from rising too fast".
"But the declining prognosis for Europe's economic growth in the near future, a major destination for China's exports, makes it less likely that China will want to allow appreciation for these purposes," he added.
Experts said the bilateral meeting would go beyond the currency issue, as China will use the opportunity to urge the US to relax its high-tech export controls and curb trade protectionism, while the US will demand a more favorable business environment for foreign companies, including those from the US.
"How to bolster bilateral trade will be a major topic during the dialogue, and the US will also urge China to create a more open trade and investment environment for US companies," Cameron Kerry, general counsel of the US Department of Commerce, told China Daily.
Tan Yingzi and Wu Chong contributed to the story
(China Daily 05/20/2010 page14)