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China defends currency after Obama criticism

(Agencies)
Updated: 2010-02-04 18:11

BEIJING: China dismissed on Thursday US threats it would get tough with Beijing on trade and currency to ensure American goods did not face a competitive disadvantage, saying renminbi was at a reasonable level.

Foreign Ministry spokesman Ma Zhaoxu said renminbi was at a reasonable level, and that China did not deliberately pursue a trade surplus with the United States.

"At the moment, looking at international balance of payments and forex market supply and demand, the level of renminbi is close to reasonable and balanced," Ma Zhaoxu told a regular news briefing.

"Accusations and pressure do not help to solve the problem," he added.

US president Barak Obama earlier said his administration was pushing China to enforce trade rules and further open their markets, adding to a range of issues weighing on relations between the world's biggest and third-biggest economies.

Analysts cautioned against reading too much into Obama's comments, saying his words were as much aimed at appealing to a domestic audience as trying to put pressure on Beijing.

"Even if China wants to adjust its exchange rate, it is nearly impossible for Beijing to meet the demands of the US -- this is China's own business," Li Jian, a researcher with a think-tank under Ministry of Commerce, told Reuters.

Markets, too, were not counting on a brisk rise.

"Previous tough comments on renminbi from the US administration have typically led nowhere," said a US bank dealer in Shanghai. "The market is not sure the latest comments by Obama will really lead to a tougher US stance on the yuan."

Offshore one-year dollar/yuan non-deliverable forwards (NDFs), a rough gauge of market sentiment, on Thursday implied a 2.8 percent rise in yuan over the next 12 months, slightly less than on Wednesday. The yuan's spot exchange rate, which is tightly controlled by the central bank, was nearly flat.

Obama has twice declined to label China as a currency manipulator, but faces a third decision on that issue in April.

Zuo Chuanchang, a researcher with the Academy of Macroeconomic Research, a think-tank under the National Development and Reform Commission, said a row over renminbi would not lead to anything like a trade war.

"It's very normal to see some disputes between China and the United States, but this doesn't mean there will be a bust-up." he said. "It's a political show, and it does really mean too much."