Treasury secretary vows to rally world powers to push for China reforms, but urges caution over straining US-China ties.
|In a bilateral meeting at the UN, Wen told Obama that China would press ahead with reforming yuan rules [AFP]|
Barack Obama, the US president, has told Wen Jiabao, the Chinese prime minister, that Beijing must to do more to resolve a dispute over the value of the Chinese currency.
In talks with Wen on the sidelines of the UN General Assembly in New York on Thursday, Obama said that the currency was the “most important issue” of their meeting, a US official said to reporters.
“The president talked about the importance of our trading relation in general and the currency issue specifically to the United States and the world economy,” Jeffrey Bader, the senior National Security Council official for Asia, said.
Obama called on China to “do more than it has done to date,” Bader said. The currency topic occupied most of the two hour meeting and “was a more intensive and fuller discussion than we’ve had in the past”.
Wen told Obama that China would press ahead with reforming exchange rate rules for the yuan, Bader said.
“Premier Wen did reiterate the Chinese intention to … continue with reform of their exchange rate mechanism.”
Wen did not speak to reporters after the meeting, but before the closed session he told Obama that he believed all differences between the US and China could be resolved through dialogue.
China’s central bank said in June that it would loosen a peg against the US dollar and let the yuan fluctuate more freely.
Since then it has risen 1.8 per cent against the dollar. However, the slow appreciation of the yuan makes it an easy target for US politicians eager to address high unemployment in an election year.
The talks between Obama and Wen came as US politicans appeared to move closer than ever to acting on long-standing threats to pass legislation that would penalise China for keeping its currency artificially low.
Critics inside and outside Congress claim that China deliberately undervalues its currency by as much as 25 per cent to 40 per cent, in order to give Chinese companies an unfair trade advantage, and thereby hurting US exports and employment.
On Wednesday, Wen said that the exchange rate was not to blame for the huge US trade deficit with China, and he called for “large-scale” trade co-operation with the US.
“If the renminbi appreciates by 20 to 40 per cent according to the requests of the US government … there will be major turbulence in the Chinese society”
Wen Jiabao, Chinese prime minister
“There is no basis for a drastic appreciation of the renminbi [yuan],” he told members of the US-China Business Committee.
Wen was responding to recent comments from US officials that China is suppressing the value of its currency against the dollar in order to raise the competitiveness of its exports.
“If the renminbi appreciates by 20 to 40 per cent according to the requests of the US government, we do not know how many Chinese companies will go bankrupt and how many Chinese workers will be laid off and how many rural workers will go back to their homes and there will be major turbulence in the Chinese society,” he said, according to a translation of his speech.
A US House of Representatives committee has scheduled a vote for Friday on a China currency bill that would treat the “undervalued” currency as an export subsidy, and allow the US commerce department to impose countervailing duties on Chinese products to offset the undervaluation.
Bader said the Obama administration does not take a position on the currency legislation, beyond wanting to ensure it was consistent with international obligations.
“The president made no commitment to Premier Wen about this legislation,” he told reporters.
Pushing back against the US pressure, Wen said on Wednesday that China, too, had employment considerations and the 20 per cent appreciation of the yuan demanded by US legislators would cause many bankruptcies in the Chinese export sector, where firms operate on thin margins.
“The conditions for a major appreciation of the renminbi do not exist,” Wen said, adding the appreciation of the currency demanded would not bring jobs back to the US because American firms no longer make most of labour-intensive products China exports.
Prospects for action in the Senate, which would also have to approve legislation, are uncertain. Key senators have said that time may be too tight since legislators hope to leave Washington in just a few weeks to campaign ahead of the November elections.
“Both Democrats and Republicans from industrial districts need a vote on this before they go home in November, and that’s … I think what’s really driving this issue,” Lloyd Wood, a spokesman for the Fair Currency Coalition, an alliance of manufacturing and labour groups which backs the currency bill, said.
The US treasury department said that it would “carefully examine” any proposals put forward by Congress. A US trade representative’s office spokeswoman said it was reviewing whether the House bill is consistent with World Trade Organisation rules.