264) China vs USA: exchange rates and trade frictions

China hits back at US over trade and currency
BBC News, Thursday, 4 February 2010

Chinese foreign ministry spokesman Ma Zhaoxu: "Accusations and pressure do not help"

China has hit back at the US a day after President Barack Obama promised to take a tougher line with Beijing over currency and trade.

Chinese foreign ministry spokesman Ma Zhaoxu insisted the value of the Chinese yuan was not the main reason for China's trade surplus with the US.

Mr Obama vowed to ensure that countries were not giving their currencies an unfair advantage over the dollar.

Ties between the US and China have been strained over an arms deal with Taiwan.

Tensions have also risen over reports of Chinese cyber attacks on US-run websites and a planned visit to the US by the Dalai Lama.

US companies have long complained that China keeps its currency artificially undervalued, allowing a steady flow of cheap exports around the world.

Graph showing US-China trade deficit

At a meeting with Senate Democrats, Mr Obama was asked whether the US would cut ties with Beijing over continuing trade disputes.

He said he would continue to make sure that China and other countries abided by trade agreements, but warned it would be a mistake for the US to become protectionist.

"The approach that we're taking is to try to get much tougher about the enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways," he said.

"But what I don't want to do is for us as a country or as a party, to shy away from the prospects of international competition."

Mr Obama also said foreign exchange rates would be monitored.

"One of the challenges that we've got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price," he explained.

But Mr Ma said on Thursday that the value of the Chinese yuan was at a reasonable level and that China was not pursuing a trade surplus with the US.

"At the moment... the level of the yuan is close to reasonable and balanced," he said.

Mr Ma said he hoped any problems with the China-US trade relationship could be solved through dialogue.

"Trade co-operation between the US and China is mutually beneficial," he said.

"We hope the American side sees the problems within the China-US trade co-operation objectively and reasonably and continues to negotiate on an equal basis. Accusations and pressure do not help to solve the problem."

Chinese trade figures released in December showed China likely to overtake Germany as the world's largest exporter.

China said it had exported goods worth $1.2tn (£757bn) in 2009, while Germany is expected to register a figure of $1.18tn (£744bn).

The figures led to renewed complaints from China's trading competitors that its currency is undervalued.

On Wednesday, Mr Ma told President Obama meeting the Tibetan spiritual leader would further erode ties between Beijing and Washington.

"We urge the US to fully grasp the high sensitivity of the Tibetan issues, to prudently and appropriately deal with related matters, and avoid bringing further damage to China-US relations," he said.

China, which took over Tibet in 1950-51, considers the Dalai Lama a separatist.



US-CHINA TENSIONS
Google - China denies being behind an alleged cyber attack on the US search engine
Taiwan - a US sale of $6.4bn (£4bn) of defensive arms to Taiwan has angered Beijing
Tibet - China says a US meeting with the Dalai Lama would "undermine relations"
Trade - rows over imports and exports of meat, media, car tyres and raw materials
Iran - the US fears China will not back tougher sanctions against Tehran over its nuclear programme
Climate - the US is disappointed at China's tough position at the Copenhagen Summit

Relations hit a bad patch
The US-China power balance