China hits back, tells U.S. not to 'politicize' yuan policy

Obama Thursday called on China to adopt a “market-oriented” exchange rate policy, increasing the pressure on Beijing to allow the yuan — effectively pegged to the dollar since mid-2008 — to appreciate.

The United States and the European Union, key trade partners for China, say the Communist leadership has intentionally kept the currency low to boost its exports, vital to the country's emergence from the global crisis.

“We believe the yuan exchange rate issue will not help shrink or increase our trade surpluses and deficits,” People's Bank of China vice governor Su Ning said, according to Dow Jones Newswires.

“We don't agree with politicizing the renminbi exchange rate issue,” Su said on the sidelines of China's annual session of parliament.

“We also don't agree with a country taking its own problems and having another country solve them.”

Obama, whose speech to the Export-Import Bank in Washington was the latest salvo in an increasingly tense Sino-U.S. relationship, said the rebalancing of the global economy was essential in the aftermath of the global slowdown.

“Countries with external deficits need to save and export more. Countries with external surpluses need to boost consumption and domestic demand,” the U.S. leader said.

“And as I've said before, China moving to a more market-oriented exchange rate will make an essential contribution to that global rebalancing effort.”

Speculation is mounting that the U.S. Treasury will soon label China a currency “manipulator” in a forthcoming semi-annual report.

Chinese Premier Wen Jiabao said last week that the yuan would be kept “basically stable” in 2010, but experts say there is room for potential movement.

Relations between China and the United States have been strained for months over a number of issues, including the value of the yuan, several trade disputes, U.S. arms sales to Taiwan, and Obama's meeting with the Dalai Lama.

The two countries are also at odds over Google's threat to leave China after what it said were China-based cyber-attacks on its source code and on the Gmail accounts of Chinese human rights activists around the world.

China has repeatedly said it is up to Washington to resolve the problems in the relationship, which Obama said last year was one that would “shape the 21st century”.

Also on Thursday, the U.S. State Department slammed China's human rights record in an annual report, highlighting increased repression in the restive Tibet and Xinjiang regions, and the detention and harassment of activists.

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