A Chinese trade official defended controls on the yuan as US Treasury Undersecretary Tim Adams ended talks in Beijing seeking greater currency flexibility.
The system of managing the yuan is "suitable for China's current situation," Chinese Vice Minister of Commerce Wei Jianguo (魏建國) told reporters yesterday in Beijing.
Wei declined to comment on talks earlier yesterday between Adams and Chinese officials. Adams declined to speak to reporters before leaving the capital.
The yuan had its biggest gain against the dollar in almost three weeks on Friday on speculation the visit might prompt China to let the currency trade more freely. Adams, the US Treasury's top official for international issues, earlier this month sounded out investors about the potential effect of calling China a currency manipulator, sources said.
"China probably doesn't want to let the US think faster yuan appreciation is just an easy job for them," said Frank Gong (
The yuan has gained less than 1 percent against the dollar since China revalued the currency by 2.1 percent on July 21 and ended a decade-old peg, fuelling complaints by US and European lawmakers who say the currency is kept artificially weak to spur exports. China's trade surplus tripled to a record US$102 billion last year.
The yuan closed higher at 8.0408 to the US dollar in Shanghai yesterday, a gain of 0.02 percent from Friday's close.
The yuan's biggest one-day swing against the dollar under the new system, a managed float against a basket of currencies, is less than 0.1 percent, compared with the 0.3 percent allowed.
The yuan will rise 4.2 percent to 7.7 per dollar in a year, according to forward contracts traded in Hong Kong as of yesterday afternoon. JPMorgan's Gong forecasts the currency will appreciate to 7.2 to the US unit by the end of this year.
Adams this month asked investors and academics in New York and Washington to assess the market reaction if the department labels China a currency manipulator in a semiannual report on exchange rates, people familiar with the situation said.
The Treasury official on Thursday said the US wants Malaysia to make the ringgit more flexible during a visit to Kuala Lumpur, part of an Asian tour that includes his visit to Beijing. He will brief the press in Tokyo tomorrow.
Cheaper exports from China helped swell the US trade deficit with Beijing to a record US$201.6 billion last year.
US Senators Charles Schumer, a Democrat, and Lindsey Graham, a Republican, are proposing legislation that would impose tariffs on Chinese imports unless the yuan is allowed to strengthen.
China's Ministry of Commerce said today that the US government's data overstate the deficit and ignore the benefits that US companies get from operating in China.
"The US has exaggerated its trade deficit with China," spokesman Chong Quan (崇泉) said in a statement on the ministry's Web site, which put the deficit at US$114 billion. The statement didn't give a reason for the discrepancy.
US companies operating in China sell more than US$75 billion of goods and services annually, the ministry said.
Rapid yuan appreciation against the dollar would boost China's jobless rate, deter foreign investment and harm domestic banks, the central bank's head researcher said.
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