China will get to know that more yuan flexibility would benefit it, U.S. Treasury Secretary Timothy Geithner said on Tuesday as China's Foreign Ministry defended the country's currency policy is not aimed at seeking a huge trade surplus.
Geithner, who is visiting India, said that the global economic recovery "looks quite strong now," also said it was "China's choice" whether or not it revalues the yuan, or RMB, according to a Reuter report.
In Beijing, a Foreign Ministry spokeswoman and two government economists held out the prospect of the yuan being allowed to resume its rise after a 20-month pause, due to the abrupt meltdown of the world's financial system and the Wall Street.
But they said at separate briefings that Beijing would proceed with caution and on its own terms.
"We don't want to see our exchange rate kept unchanged," said Zhang Yan-sheng, director-general of the Institute for International Economic Research, a think-tank under the National Development and Reform Commission.
Making the yuan more flexible was a challenging task, not least because of a lack of hedging instruments in China and domestic companies' lack of experience in handling a fluctuating exchange rate, the economist said.
Meanwhile, the White House said that U.S. President Barack Obama will raise the currency issue with Chinese President Hu Jintao in Washington next week on the sidelines of a nuclear security summit, hosted by Obama himself.
"The administration will continue to press the Chinese to ... value their currency in a way that is much more market-based," White House press
secretary Robert Gibbs told a news briefing.
"That is the way we think is best at this point, and I think you've seen reports of the past week or so about the Chinese beginning to take some
steps and realize on their own that this is the best path for them," Gibbs said.
With U.S. unemployment stuck near 10 percent, Obama faces rising pressure to persuade Beijing to allow the yuan to resume appreciation so as to help U.S. enterprises compete with Chinese goods.
"I am confident that China will decide it's in their interest to resume the move to a more flexible exchange rate that they began some years ago and suspended in the midst of the crisis," Geithner told India's NDTV.
Geithner over the weekend decided to delay
a report on whether China manipulates its currency, pledging to work instead through the Group of 20 economies and other multilateral meetings to press for more currency flexibility, the Reuter report said.
Top officials of the two countries, including Geithner, will convene a high-level bilateral strategic and economic dialogue in May in Beijing to discuss the RMB and other issues.
"There is no doubt that this is of great concern to a number of economies around the world. I think the best thing to do is let Secretary Geithner and others work through this process in these upcoming meetings and evaluate where we are," said White House spokesman Gibbs.
Earlier on Tuesday, a Chinese Foreign Ministry spokeswoman said China never manipulates the yuan and rejected the argument that a firmer yuan would reduce the U.S. trade deficit with China.
Jiang Yu, the Foreign Ministry spokeswoman, said China does not manipulate the yuan and called for trade differences to be settled through dialogue.
"The renminbi exchange rate is not the main reason behind the U.S.-China trade deficit," Jiang told a regular briefing. "So naturally, renminbi appreciation is not the solution to rebalance Sino-U.S. trade."
Financial markets expect Beijing to permit the yuan to resume its rise sometime this year in order to cap inflation and help promote domestic
demand.
The yuan rose in offshore forward markets on Tuesday as traders read the postponement of the "manipulation" decision as a sign of an easing in
bilateral tensions that could buy time for policy-makers in Beijing to reach a consensus.
The market is now pricing in a 3 percent rise against the dollar in a year's time.
Jiang, the Foreign Ministry spokeswoman, said China would keep perfecting its "managed floating exchange rate" but would stick to the three principles it has always followed: any change must be at Beijing's initiative, the manner of the change must be controlled, and it must be gradual, to avert disruptions to the global economy.