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06 December 2023

Deals, yuan in focus as China's Hu visits US

By Reuters

Chinese President Hu Jintao arrived in the United States on Tuesday for a four-day state visit peppered by U.S. complaints about Beijing's currency policies but sweetened by some $8.5 billion in business deals.

Treasury Secretary Timothy Geithner weighed in on the dispute over the level of the yuan hours before Hu flew in, while the White House urged China to take more steps to allow its currency to strengthen.

"I actually think it's helpful for China to understand this is a big issue for Americans, just like it's a big issue for all of China's trading partners," Geithner told National Public Radio.

Hu said earlier this week he would not accept U.S. arguments that the yuan was undervalued -- an opening volley in a disagreement that is expected to dominate this week's trip.

Analysts are calling the visit the most important by a Chinese leader since Deng Xiaoping helped open bilateral ties 30 years ago, given China's growing military and diplomatic influence and its emergence as the world's second-largest economy after the United States.

"The purpose of my visit is to enhance mutual trust, promote friendship, deepen cooperation and move forward the positive, cooperative and comprehensive China-U.S. relationship for the 21st century," Hu said in an arrival statement.

Tensions over trade and a Chinese surplus Washington puts at over $250 billion for 2010, will feature prominently in Wednesday's summit between Hu and President Barack Obama. Other thorny matters, from rebalancing the global economy to dealing with North Korea to the delicate issue of China's human rights practices, will round out the agenda.

In an effort to accentuate the positive side of relations, Obama and Hu are scheduled to drop by a meeting on Wednesday at the White House of top executives from the two countries.

US chief executives who will attend the meeting include Microsoft Corp.'s Steve Ballmer,  Goldman Sachs' Lloyd Blankfein, General Electric's Jeff Immelt and Boeing's Jim McNerney.

Chinese business leaders at the meeting will include executives from Lenovo, China Investment Corp, Wanxiang Group and Haier, a US official said.

In a show of China's purchasing power designed to dispel perceptions that trade is a lopsided, job-killing affair for the United States, Hu was preceded by Chinese executives who signed about $8.5 billion in deals with US firms.

The US Energy Department said Alcoa Inc and China Power Investment Corp signed an agreement to collaborate on a range of aluminum and clean energy projects representing $7.5 billion in potential investment within China and abroad.

With cooperation in the clean energy field a priority for both governments, General Electric agreed with China Huadian Corp to supply about 50 gas turbines, which will generate some $500 million in revenue over the next five years.

A 120-member Chinese delegation in Houston signed two cotton-import agreements with six companies that China's Xinhua news agency reported were worth $600 million.

At least 25 more deals, including soybean, are expected on the Chicago leg of Hu's trip on Friday, city officials said.

Details of the transactions were not entirely clear and one US industry official said a final tally of deals might depend on whether the Chinese see the summit with Obama as a success.

"There's always a huge political agenda surrounding the business issues. In this case, human rights and everything else," said the official.

The summit has galvanized Chinese human rights groups -- as well as the Tibetan, Taiwanese and Uighur communities and the banned Falun Gong sect -- that are airing grievances against Hu's government and urging Obama to speak out on human rights.

Pressed on how forceful Obama would be with Hu, White House spokesman Robert Gibbs said: "I think the president will be firm ... in outlining the important beliefs of this administration and this country."

Currency concerns took center stage in Washington.

Senators Sherrod Brown, a Democrat, and Olympia Snowe, a Republican, sent a letter to Geithner promising to introduce legislation to "address China's unlawful practice of currency manipulation."

"China's actions to subsidize its exports through currency manipulation pose both immediate and long-term challenges to American manufacturers and workers still recovering from the economic recession," they wrote.

Their letter came after a group of senators said on Monday the United States had to pass legislation to punish China if it fails to allow its currency to rise in value.

The Congressional Steel Caucus of lawmakers from steel-making states urged Obama to tell Hu that "American patience for its unfair and illegal trade practices, and its exploitative and anti-competitive policies, has run out."

"There's increasing frustration, particularly on the exchange rate issue, with the pace at which the Chinese have advanced," Steven Dunaway, an international economics expert at the Council on Foreign Relations, told reporters.

China's Foreign Ministry said it hoped US lawmakers would not sour the tone of Hu's visit, repeating that Beijing was committed to reforming its exchange rate system.

"A great many factors have proven that the renminbi's (yuan's) exchange rate policy is not the main cause of the China-U.S. trade imbalance," said ministry spokesman Hong Lei. "We hope relevant U.S. lawmakers ... avoid harming the overall interests of China-U.S. economic and trade cooperation."

Investors will watch for signs that Hu and Obama can ease tensions after a rocky 2010, but many analysts caution not to expect too much beyond friendly words and business deals.

Tensions over currency were a big factor in relations last year. The yuan has risen nearly 3.5 percent against the dollar since Beijing relaxed its peg to the dollar in June, much less than demanded by critics in the United States.

Hu, in a written interview with The Washington Post and The Wall Street Journal, said China had taken steps toward a more flexible exchange rate policy.

China also says the United States should do more to rebalance the trade relationship. Beijing's statistics show a surplus in China's favor of $181 billion last year but, by Washington's reckoning, the U.S. deficit with China totaled $252 billion during the first 11 months of 2010.

China has tried to polish its image in the United States, running an advertisement on large billboards featuring basketball star Yao Ming in New York's Times Square.

Zheng Bijian, a Chinese government adviser, said he was concerned about US fears about China's rise.

"If these doubts and assumptions become mainstream opinion, and even form part of national strategic judgments, then this will not only create grave misjudgments about China's direction of development, it will also seriously damage the United States' own interests and shared Sino-U.S. interests," he said.