China defies U.S. calls for yuan appreciation

China defies U.S. calls for yuan appreciation

The U.S. must put to rest the contentious issue of yuan appreciation and acknowledge China's sovereignty if the U.S. wants closer economic cooperation, Chinese President Hu Jintao said today ahead of a visit in Washington tomorrow.

Hu said China and the U.S. should remove the "zero-sum Cold War mentality" while strengthening trade, anti-terrorism and energy cooperation between the two countries, according to the Washington Post and the Wall Street Journal.

"We should respect each other's sovereignty, territorial integrity and development interests," the Chinese leader said. Contrary to U.S. Treasury Secretary Timothy F. Geithner's claim that inflation in China will result to "necessary" adjustments in the Chinese currency's valuation, Hu said rising prices should not be the "main factor" to measure yuan appreciation.

Since U.S. President Barack Obama's state visit to China in 2009, the two countries have faced contentious issues like the awarding of the Nobel Peace Prize to dissident Liu Xiaobo, alleged unfair trade practices by China, and the muted response by Chinese officials on North Korea's aggression towards South Korea.

Hu, together with Chinese Commerce Minister Chen Deming, will meet with Congressional leaders and will make a stop in Chicago during the four-day visit.

Inflation is rising more rapidly in China than in the U.S. which has made Chinese products less competitive, Geithner pointed out last week. On January 12 he commented that while the Chinese currency was still significantly undervalued, the "fundamental forces that are pushing Chinese productivity growth and are pushing inflation higher will bring about the necessary adjustment in exchange rates."

Posted by James Fried on Monday January 17 2011, 3:25 AM EDT. Ref: Bloomberg. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0