China is likely to resist US calls that it loosen controls on the value of its currency when US Secretary of the Treasury John Snow is scheduled to visit China and Japan next month, Westpac Banking Corp said in a report on Monday.
Chinese yuan forward contracts strengthened on Monday after a Goldman Sachs Group Inc report last week said China may allow its currency to rise to avoid criticism at a meeting of Group of Seven finance ministers next month.
"Much of the case for revaluation is based on hype and spin," Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp, wrote in the report.
China's widening current account surplus is caused more by an increase in foreign investment into the country than by an increase of exports, and the increase in foreign reserves does not mean China must revalue its currency, he said.
Snow will visit Beijing and Tokyo from Sept. 1 to 3 and is to attend a meeting of APEC nations from Sept. 4 to 5 in Phuket, Thailand.
"Achieving strong and vibrant global growth is one of the world's most pressing priorities," Snow said in a statement on Monday.
"We live in an interdependent world economy where our fortunes are inextricably linked. Let me be clear: increased economic growth overseas equals more jobs here."
Snow will meet in Beijing with Chinese leaders, top economic officials and business leaders, a Treasury Department statement said.
"Secretary Snow will discuss a broad range of issues important to the country's economic relationship with the US, including liberalization and reform of the financial sector, trade and exchange-rate issues," the statement said.
Snow is also set to meet with ministers and central bankers from G7 industrialized nations around Sept. 20, where the Asian nations' buying or selling of currencies and foreign exchange policy will also be discussed, the report said.
The pressure China faces is political and not economic, the report said.
"If it were purely economic, I believe it would only be on incontrovertible evidence of a recovery in global growth that China would consider revaluation," Rennie said.
The nation will act to make it easier for more local investors to buy assets overseas, spurring the flow of money out of the country and its currency, he said.
"China will have to move to liberalize the capital account, and that will have bearish implications for the dollar," Rennie wrote. "This I believe will be the bigger issue in the months ahead."
The US trade deficit with China bulged 50 percent in three years, to US$103 billion -- about a quarter of the total US deficit -- last year. So far this year, it is up another 27 percent from last year.
US manufacturers say a vastly undervalued yuan -- fixed at about 8.3 yuan to the dollar -- is making US goods too costly for the Chinese and Chinese goods unfairly cheap in the US.
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