By Andrew Higgins
Washington Post Staff Writer
Tuesday, April 13, 2010; 7:11 PM
BEIJING -- Amid a clamor in Washington over the value of the Chinese currency, President Hu Jintao used a visit to the United States this week to address what, for any Chinese leader, is a more pressing concern: asserting his nationalist credentials in the face of foreign pressure.
Hu, who arrived in Washington on Monday for the Nuclear Security Summit, told President Obama that China is reviewing its currency policy. But he stressed that any modification "will not be advanced by outside pressure," according to official Chinese media reports Tuesday, and will be based on China's "own economic and social development needs."
The Chinese president's remarks followed widespread speculation in the foreign media and on foreign currency markets in recent days that China is about to bow to American demands and raise the value of the yuan, or renminbi, which is essentially pegged to the dollar. Such a revaluation would make Chinese exports more expensive on world markets and make foreign imports to China cheaper.
China's currency policy has become a major source of friction between Washington and Beijing, though both sides now seem keen to calm tensions and rebuild relations frayed by a host of economic and other issues, including arms sales to Taiwan and Tibet.
Obama has said he regards it as critical to a more stable world economy that China let the value of its currency float more freely on world markets. Economists feel such a policy would be healthier for Chinese companies and workers in the long run, and would help correct the type of global economic imbalances that have pushed the annual U.S. trade deficit with China to more than $200 billion. But following his meeting with Hu, Obama struck a conciliatory tone and said China "rightly sees the issue of currency as a sovereign issue."
"I think they are resistant to international pressure when it comes to them making decisions about their currency policy and monetary policy," Obama said.
Treasury Secretary Timothy F. Geithner stopped off in Beijing last week for a brief, previously unscheduled trip, part of a series of moves designed to head off a confrontation over currency. A few days before, he announced that the Treasury Department will postpone a report originally due Thursday that could brand China a "currency manipulator," a designation that would open the way for possible trade sanctions.
Li Daokui, director of the Center for China in the World Economy at Beijing's Tsinghua University and a member of the Monetary Policy Committee of People's Bank of China, the country's central bank, said repeated demands that China let the yuan rise had put Beijing in a bind. Beijing has debated gradually loosening the peg to the dollar but is afraid that any change would be interpreted as "China giving up under high pressure from the U.S.," he said.
Recent reports of an imminent announcement of a shift in China's exchange rate policy are "not true," he said, adding that any revaluation of the yuan will take place without public fanfare.
"China can either adjust it or keep the status quo for a while," he said.
The currency question has become highly political in both the U.S. and China. U.S. lawmakers denounce China's exchange rate policy as giving its exporters an unfair advantage while many in China complain that the United States is trying to bully Beijing in an effort to solve economic problems of its own making. China ran a trade deficit in March for the first time in years, but this was widely seen as a blip and doesn't reflect any significant slowing of China's export juggernaut.
In his meeting with Obama in Washington, China's leader suggested Beijing will at some point let the yuan rise, a step it has spent billions of dollars to prevent since the 2008 global financial crisis. But, addressing a complaint widely heard in Congress that China's turbocharged exports steal American manufacturing jobs, Hu said that a revaluation "would neither balance Sino-U.S. trade nor solve the unemployment problem in the United States," according to China's official Xinhua news agency.
Jin Canrong, deputy dean of the School of International Studies in Beijng, said Hu's comments establish the political groundwork at home in China for an eventual revaluation by telling his "domestic audience" that China won't shift its policy to please foreigners but for its own reasons. "It's a preparation for real action later," he said.
Special correspondent Zhang Jie in Beijing and staff writer Howard Schneider in Washington contributed to this report.