MercoPress. South Atlantic News Agency

US/China hold talks on “economic relations” and global situation

The value of the Chinese currency Yuan, at the heart of the discussion

US Treasury Secretary Timothy Geithner held talks Thursday in Beijing with Vice-Premier Wang Qishan. Neither the US nor Chinese officials would comment in detail on the meeting. But it is understood to be part of a long-running dispute over the value of the Chinese Yuan, which the US says has been kept artificially low.

The US is trying to persuade China to allow its currency to trade more freely on foreign exchange markets, and there are signs that this will happen.

“The two sides exchanged views on US-China economic relations, the global economic situation and issues relating to the upcoming economic track dialogue of the second US-China Strategic and Economic Dialogue, to be held in Beijing in late May,” the US Treasury Department said.

The department has confirmed that Mr Geithner departed Beijing after the 75-minute meeting and is flying back to Washington.
Mr Geithner has been visiting India and flew to Hong Kong on Wednesday evening before continuing on to Beijing.
While in India, the Treasury secretary said he was confident that China would decide a more flexible Yuan was in its own best interests.

The White House also reaffirmed its desire on Wednesday to persuade China to embrace a more flexible currency in a concerted effort to push for some kind of resolution to the long running dispute.
The US is talking tough but also making conciliatory gestures towards China.

Last weekend, the US Treasury delayed the publication of an official report on whether China manipulates its currency.

Geithner said he would delay the report, which was due on 15 April, until after a series of G20 and bilateral meetings with China. The Yuan will also be on the agenda next week when President Barack Obama meets his Chinese counterpart, Hu Jintao, on the sidelines of a nuclear summit in Washington.
There are some signs that the US's efforts to persuade China may be rewarded.

Zhu Baoliang, chief economist at the State Information Centre, a government think-tank, said: “Regardless of how much pressure the US puts on China, we cannot let the Yuan float. What we can do is de-peg the Yuan from the dollar.”

This compromise measure would make the Yuan more flexible. Many observers see the Yuan as key to addressing trade imbalances that are destabilising the global economy.

A weak Yuan means China can export goods cheaply, allowing the country to run a huge trade surplus. However, some in China have been resisting any hasty revaluation.

“If China's economy cools off due to a large one-off appreciation, it will not benefit the world economy or US consumers because costs will rise,” said Xia Bin, a member of the central bank's monetary policy committee.

The US, along with most developed western economies, imports much more than it exports, leading to a massive trade deficit.