No concessions on strength of the yuan

There had been a flurry of optimism in the currency markets that perhaps the Chinese would use the occasion of Barack Obama's visit to announce they would finally allow their currency to rise to a level more fitting for the emerging economic powerhouse of Asia.

Those hopes still lingered as the US President and his counterpart Hu Jintao stepped out of their three-hour meeting yesterday, but were fully dashed by the time they finished speaking to the press.

"I was pleased to note the Chinese commitment made in past statements to move toward a more market-oriented exchange rate over time," Mr Obama said, pointedly unable to refer to any new statements. Such a move to float the yuan would "make an essential contribution to the global rebalancing effort".

The Chinese, for their part, made no mention of the currency at all. Government ministers have talked in recent days about how their decision to hold the yuan down and effectively peg it to the declining dollar is in fact helping the global economy more than it is hindering, at least for now. Chinese economic growth has resumed its pre-crisis boom, and the boost to global trade has helped ease the recession.

The US blames China's management of the yuan for keeping its exports artificially cheap. Not only does that hurt US manufacturing, it also creates a huge trade surplus that the Chinese government is using to buy US debt. That demand for US debt was one of the reasons the American housing market reached bubble proportions.

Last week, the Chinese central bank hinted at an end to the dollar peg, abandoning its oft-repeated promise to hold the currency "basically stable".

At the weekend, however, Chinese officials refused to sanction a statement at the Asia Pacific Economic Co-operation summit in Singapore that would have pressed it to adopt "market-oriented" exchange rates for the yuan.