Chinese official hints at currency accord

Chinese official hints at currency accord
By Jamil Anderlini in Beijing and Alan Beattie in Washington
Copyright The Financial Times Limited 2010
http://www.ft.com/cms/s/0/24a3588c-3e98-11df-a706-00144feabdc0.html


Published: April 2 2010 22:06 | Last updated: April 2 2010 22:06
Beijing may adjust its policy of pegging its currency to the dollar provided a visit this month by Chinese President Hu Jintao to Washington goes smoothly, according to a top adviser to China’s central bank.

Li Daokui, a professor at Tsinghua university and a member of China’s central bank monetary policy committee, said as long as the US respected China’s “core interests” the currency disagreement could be easily solved.

Barack Obama and his Chinese counterpart talked for an hour on Thursday evening, during which Mr Hu stressed that the “proper handling of Taiwan and Tibet” was the biggest factor in Sino-US ties, according to China’s state media.

“As long as this is understood, everything else will be easy to handle and we will find the key to unlock the exchange rate problem,” Mr Li told the Financial Times.

Mr Hu will attend a summit on nuclear security in Washington on April 12-13, just days before the US Treasury is scheduled to issue a report on whether China has been manipulating its exchange rate to boost exports.

There is rising speculation in Washington that the Treasury report will be delayed to avoid the administration having to announce such a politically explosive decision close to Mr Hu’s visit.

Currencies in context

FT interactive graphic: The dollar in the context of market trends

Larry Summers, economic adviser to Mr Obama, on Friday said that exchange rates were “going to have to be an area for international consideration”.

According to analysts, Mr Hu’s decision to attend the summit sends a strong signal that the administration will not name China a currency manipulator, potentially heralding broader co-operation on issues such as Iran.

China allowed the renminbi to appreciate 21 per cent against the dollar between July 2005 and July 2008, but then repegged the currency to help its export sector during the economic crisis.

In comments to Bloomberg Television, Tim Geithner, US Treasury secretary, said he was “confident” China would decide that allowing a more flexible currency was in its interest: “We’re going to maximise the chance that they move quickly.”