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UPDATE 1-Hu says China will not be pressured on yuan

Published 04/12/2010, 09:19 PM
Updated 04/12/2010, 09:32 PM

* China's Hu says yuan rise would not solve U.S. problems

* Hu urges United States to loosen export controls

* Hu says global economic recovery at critical stage

BEIJING, April 13 (Reuters) - China will "firmly stick" to its own path for yuan reform, President Hu Jintao said in a meeting with U.S. President Barack Obama, emphasising that Beijing would not be pushed by external pressure.

Faced with a chorus of U.S. calls to let the yuan rise, Hu said China would base any decision on its own economic and social needs and stressed that a stronger yuan would not be a panacea for woes afflicting the world's largest economy.

"Yuan appreciation would neither balance Sino-U.S. trade, nor solve the unemployment problem in the United States," the official Xinhua news agency reported on Tuesday in an account of a bilateral meeting that took place in Washington.

Beijing has frozen the yuan's exchange rate against the dollar since mid-2008 to help cushion its economy from the global downturn, but the strength of China's recovery has fuelled criticism of this policy as well as market expectations that it is about to resume appreciation.

Hu said that China does not seek a trade surplus with the United States and would like to increase its imports from the country, the report added. To that end, he urged the United States to loosen its export controls over high-tech products.

Hu met with Obama on the sidelines of a nuclear security summit.

Obama repeated his call for more yuan flexibility, but trod carefully with his focus on securing Chinese backing for tougher sanctions against Iran's nuclear activities. For story, see: [ID:nN08208811]

Hu said that China wished to strengthen dialogue and coordination with the United States on the Iranian nuclear issue, as well as a range of other topics, from climate change to nuclear developments in North Korea.

The bulk of the Xinhua report was devoted to what Hu said about the economy and the yuan.

"China will firmly stick to a path of reforming the yuan's exchange rate formation mechanism, based on our own economic and social development needs," Hu told Obama, according to Xinhua.

"In making reforms, we will give careful consideration to global economic developments and changes, as well as to China's economic condition," he said.

The world economy was at a critical moment in its recovery after the global financial crisis, with many uncertainties lying ahead, Hu said.

Both China and the United States faced difficult tasks in promoting economic growth, creating jobs and changing their economic structures, he added.

"Under such circumstances, we should strengthen cooperation and together maintain international economic and financial stability," Hu said.

Offshore yuan forwards (NDFs) edged down against the dollar on Monday after China reported on the weekend its first monthly trade deficit in 6 years, which could reinforce Beijing's caution on the yuan, weighing against any substantial revaluation. [ID:nTOE63B04J] (Reporting by Simon Rabinovitch; Editing by Ken Wills)

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