WASHINGTON (AFX) -- China never sought a massive trade surplus with the United States, but will continue taking steps to reduce the imbalance, including efforts to boost domestic consumption and increase the flexibility of its yuan currency, Chinese President Hu Jintao said Wednesday.
'China takes trade imbalance between our two countries seriously and works hard to address the issue. China continues to implement the policy of expanding domestic demand to drive its economic and social development,' Hu said through a translator.
Hu spoke at a Boeing aerospace museum in Everett, Wash., where he was introduced by Microsoft Chairman Bill Gates. The speech was billed as a major policy address.
Hu arrived in Seattle Tuesday, and attended a dinner that evening at Gates' home. The Chinese president will meet President Bush at the White House on Thursday.
Hu's visit comes as China seeks to tamp down U.S. anger over a growing trade gap that totaled $202 billion in 2005. U.S. exporters, lawmakers and the Bush administration contend that China's currency policies and lackluster compliance with World Trade Organization obligations have given China an unfair advantage over American firms.
The Bush administration continues to press China to increase the flexibility of its currency, which many economists contend remains significantly undervalued against the U.S. dollar. Some lawmakers have proposed legislation that would impose punitive tariffs on China unless it allows a further appreciation of the yuan.
Treasury Undersecretary Timothy Adams on Wednesday said that China is moving 'far too cautiously' in allowing a more flexible currency.
China's foreign-currency reserves remain 'excessive,' and 'Chinese currency practices are constraining other emerging Asian countries from pursuing greater flexibility,' Adams said, in a statement outlining topics at this week's upcoming meetings of the Group of Seven industrial nations, International Monetary Fund and World Bank.
Hu, while pledging to open markets and seek a more flexible currency regime, said China's bilateral trade surplus shouldn't be blamed on Beijing.
The fundamental cause of the trade gap is a 'different industrial restructuring of our two countries and the accelerated international division of labor driven by economic globalization,' Hu said.
Indeed, economists say that China's role as a popular assembly point for Asian production networks is a key factor in China's rising trade surplus.
Hu said China would 'further open' its markets to U.S. goods and services. Beijing, meanwhile, hopes the United States will take steps to promote exports to China, including 'easing export controls and reducing protectionist measures in the interest of addressing the trade imbalance issue in a better and more effective way,' Hu said.
On currency policy, Hu said China would 'continue to firmly promote financial reforms, improve the [renminbi] exchange rate mechanism, develop the foreign exchange market, increase the flexibility of the [renminbi] exchange rate, and improve the capacity of financial institutions to set prices at their own discretion and to conduct risk management.'
Hu offered no timetable or specific targets, but said China's goal is to maintain the 'exchange rate basically stable at an adaptive and equilibrium level,' Hu said. 'This serves in the interests of China, the interests of the United States, and the common interests of all countries in Asia and the world at large.'
Chinese officials have warned against allowing a rapid rise in the value of the yuan, warning that sudden fluctuations could undercut foreign investment in China.
China had long maintained a hard peg that valued the yuan at 8.28 per dollar. Under heavy pressure, China agreed last July to revalue the yuan at 8.11 to the dollar, and to peg its value to a basket of currencies. The yuan's meager, subsequent appreciation, however, has frustrated U.S. officials, who say the currency remains vastly undervalued. This story was supplied by MarketWatch. For further information see www.marketwatch.com.