US-China trade war over yuan edges closer

China bluntly rejects US calls to revalue currency

The Chinese President has snubbed pleas from President Barack Obama for Beijing to revalue the Chinese yuan. It leaves relations between the so-called G2 at a fresh low, and raises fears of a trade war. Calls from the US Congress to formally label China a currency manipulator will intensify in the wake of the current failed round of talks.

Speaking on the fringes of the international nuclear summit in Washington, at which the two men met, President Hu Jintao reportedly told the American leader that an appreciation of the yuan would "neither balance Sino-US trade nor solve the [US] unemployment problem", and that the value of the yuan would be set primarily to suit domestic Chinese considerations.

China News Service reported that Mr Hu said China "is firmly committed to the direction of reforming the... exchange rate regime. This is based on the needs of China's own economic development." However, he added that "outside pressures will not advance reform". Mr Obama had urged the Chinese to put the yuan on a more "market oriented" footing.

Many in Washington accuse the Chinese of manipulating their currency to gain an unfair advantage in trade. America's trade deficit with China – $229bn (£149bn) – is the largest bilateral deficit in world history and the main "global imbalance" to destabilise the world economy going into the recession. Trade sanctions on China have been advocated by many members of Congress as well as leading economists such as Paul Krugman.

The US Treasury Secretary, Timothy Geithner, visited China for talks last week and seemed to receive some encouragement from his meeting with the Chinese Vice-Premier, Wang Qishan. Mr Geithner has delayed an official Treasury report labelling China a currency manipulator, though the latest war of words may make such a condemnation inevitable. The diplomatic mood music has turned less harmonious in Washington.

Intermittent skirmishes have been damaging US-Chinese economic relations since the recession pushed unemployment in the US higher. The Chinese commerce ministry has introduced a duty of up to 64.8 per cent on imports of US steel, in retaliation for a US move to impose an import tax on Chinese pipes.

Despite the uncharacteristically blunt language from the Chinese, many observers believe that China will eventually agree to allow the yuan to drift higher. Options include a one-off revaluation, possibly followed by a looser peg with the dollar, a strategy followed during 2005 to 2008. However the world trade recession – more severe even than the reduction in domestic national GDPs – forced the Chinese to devalue their currency again, the source of much of the current friction.

During the boom, Western consumers became dependent on a flow of cheap Chinese capital generated by China's trade surpluses with the advanced economies, to fuel their consumption boom and property bubbles, until the whole system became so unstable it collapsed.

Fixing the global imbalances is routinely identified in G20 communiqués and other high-level diplomacy as essential to rebalancing the world economy, and many believe the value of the yuan is the biggest obstacle to such a fundamental adjustment.

News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
i100This Instagram photo does not prove Russian army is in Ukraine
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
News
Morrissey pictured in 2013
people
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
filmReview: Sometimes the immersive experience was so good it blurred the line between fiction and reality
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices