Bush Urges Hu to Let Yuan Rise in `Candid' Talks

Bloomberg
Apr. 21, 2006

April 20 (Bloomberg) -- U.S. President George W. Bush urged China's President Hu Jintao to let the yuan rise more against the dollar to help cut a record trade deficit with Asia's second-biggest economy.

``There's been some appreciation in the currency. We would hope there would be more appreciation in the future,'' Bush said after meeting with Hu today at the White House. ``The Chinese government takes the currency issues seriously and so do I.''

Bush's remarks about the yuan were more blunt than usual and offered a signal of the U.S.'s preference for the yuan's trajectory: higher. That's more than Bush administration officials such as Treasury Secretary John Snow usually ask China to do, which is to let markets decide the yuan's worth.

Regarding the currency and other disagreements on trade, Hu said through a translator that the Chinese government ``understands U.S. concerns and will continue to take steps to'' resolve the issues.

While Bush and Hu pledged their cooperation on mutual strategic interests, including Iran and North Korea, their meeting produced no breakthroughs in resolving differences, including those on currency, trade and expanding freedom in China.

Currency has been a persistent source of tension between the world's largest industrial power and the biggest developing country.

China ended its decade-old peg to the dollar last July and said it would allow the yuan, a denomination of the renminbi, to fluctuate as much as 0.3 percent each day against the U.S. currency. Since then, the yuan has gained 1.2 percent.

Currency

The value of the yuan at hovers close to 8 to the dollar, a government policy that requires the central bank in China to stockpile U.S. Treasuries. That policy has kept Chinese exports artificially cheap and prompted U.S. lawmakers, led by Senators Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, to propose trade sanctions.

``In the future, we will continue to make adjustments to the renminbi exchange rate regime,'' Hu said, sitting next to Bush in the Oval Office. ``We do not pursue an excessively high trade surplus'' with the U.S.

Hu's visit was marred by a protest that interrupted his remarks at the opening ceremony on the south lawn of the White House.

Protest

A lone demonstrator, a woman who was on the stand set up for news photographers, had a red and yellow of the Falun Gong spiritual movement and shouted, ``President Bush, stop them from persecuting Falun Gong'' and in Chinese yelled `President Hu, your days are numbered.'' Several minutes elapsed before uniformed Secret Service officers dragged her away.

Falun Gong was declared an illegal cult in China in 1999. The movement's supporters contend China has imprisoned thousands of Falun Gong followers and harvested organs for transplant from prisoners.

Hu hesitated before being urged on by Bush.

In his remarks, Bush vowed to hold ``candid'' discussions with Hu and addressed the list of tensions between the two countries, including trade and human rights.

``We can be candid about our disagreements'' in such areas as freedom of expression and worship, Bush said. On Taiwan, which the Chinese regard as a renegade province, the U.S. will maintain its current policy and any conflicts should be resolved peacefully, he said.

To reporters later, Bush said, ``I do not support independence for Taiwan.''

Shared Interests

The U.S. president also said the two nations share many strategic interests, including economic expansion, the battle against terrorism and dealing with the nuclear threats from Iran and North Korea.

``Bush mentioned shared strategic interests three times in his speech,'' said Evan Medeiros, a China specialist at the RAND Corporation in Arlington, Virginia, who attended the White House event. ``The Chinese see this as important because it's high- level recognition from the global superpower of their status as a rising great power.''

Hu, on the third day of his U.S. visit, also spoke of the mutual concerns of China and the U.S.

``Both China and the United States are countries of significant influence in the world,'' he said. ``We are ready to work with the U.S. side in the spirit of mutual benefit to facilitate the sound and steady growth of bilateral economic cooperation and trade.''

Taiwan

Hu told Bush ``we appreciate your commitments'' to a one- China policy, and said his government will ``strive toward peaceful reunification'' with Taiwan. ``We will never allow anyone to make Taiwan secede from China by any means,'' he said.

Bush also is concerned about China's growing thirst for energy and cementing Hu's cooperation on foreign policy issues.

``China's an important voice in international affairs,'' Bush said. ``I will continue to work with the president to strategize as to how best to achieve our important goal, which is an Iran without the capacity, the know-how or a nuclear weapon.''

The dilemma for Bush is that on many of the issues that are the highest priority in the U.S. -- trade and currency -- China is operating on a different timeline, analysts said.

``The Chinese are going to want to stretch it out, and we're going to want to accelerate it,'' said James Lilley, a senior fellow at the American Enterprise Institute in Washington and a former U.S. ambassador to China. ``In 2006, China is the big enchilada and this is the most important bilateral relationship in the world.''