Obama prods China on the yuan, but Hu keeps silent on the issue

Standing beside Obama after their summit, Chinese President Hu Jintao avoided mentioning the yuan or the dollar.

Instead, Hu emphasized during a joint media appearance the need to avoid trade protectionism in a thinly veiled reference to China's irritation over new U.S. tariffs on Chinese-made tyres, steel pipes and other products.

With the U.S. unemployment rate at 10.2 percent, one of Obama's priorities during his four-day trip to China is pressing Beijing over the huge trade imbalance between the two countries, a move he believes would pave the way for greater U.S. exports.

Washington says an undervalued yuan disadvantages U.S. manufacturers and is stoking global economic imbalances.

Obama said movement by China on its exchange rate would “make an essential contribution to the global rebalancing effort.”

But his reference to China's “past statements” suggested that Hu might not have been forthcoming on how Beijing might respond.

Hu said the two leaders talked of the need to keep in close contact on macroeconomic and financial policies. “I stressed that under the current circumstances, we need to oppose all kinds of trade protectionism even more strongly,” Hu said.

The United States and China — the world's biggest and third biggest economies — have agreed sustainable global economic recovery requires broad rebalancing, but that could be contentious, especially if it involves China loosening currency controls.

Sun Zhe, director of the Center for U.S.-China Relations at Tsinghua University in Beijing, said Hu's silence on the currency may stem in part from reluctance by China to be seen as making concessions under foreign pressure.

“I personally think that there may be some slight, symbolic adjustment on exchange rate policy after Obama leaves,” said Sun.

“But don't expect much. China believes that the main problem is not the weakness of the yuan but the weakness of the dollar. The feeling here is 'Why should we be the scapegoat for your dollar problems'?”

The issue of currencies has drawn testy comments in recent days from U.S. and Chinese officials. China's Commerce Ministry on Monday rebuffed calls for the yuan to appreciate, signalling resistance to change foreign exchange policy.

Outside pressure has been building on Beijing to let the yuan rise after more than a year of it being nearly frozen in place against the dollar, with the latest appeal voiced by the head of the International Monetary Fund on Tuesday.

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