President Barack Obama said Sunday that the United States expects the value of China's currency to rise significantly. He vowed to closely monitor over the next several months how China follows through on a pledge to introduce more flexibility in the management its currency.
Obama's comments at a summit of the Group of 20 industrial and developing nations came as Chinese President Hu Jintao took on critics of Beijing's currency policy by warning that wildly fluctuating currency exchange rates can threaten financial markets.
The value of the yuan, or renminbi (RMB), is a major irritant in China's relations with the United States.
American manufacturers complain that an undervalued Chinese currency gives China's exporters an unfair advantage by keeping the cost of China-made products artificially low.
Before the G-20, China tried to head off criticism by announcing that it would start allowing its currency to rise in value against the dollar. But senior Chinese officials have vowed during the economic summit that they would not bow to outside pressure to allow the currency to rise more quickly.
Critics in the U.S. Congress and elsewhere want bolder moves from China.
Obama said that the United States doesn't expect a large, immediate jump in the value of China's currency, which would be disruptive to the Chinese and world economies.
"We do expect that as more and more market forces come to bear, that given the enormous surpluses that China has accumulated, that the RMB is going to go up and it's going to go up significantly," Obama said. "And so we are going to be paying attention over the next several months to make that determination."
A G-20 communique Sunday didn't mention China's currency directly, only generally expressing a need for countries to have flexible currency exchange rates.
In a speech earlier Sunday, Hu didn't directly address complaints about the yuan's value.
But he warned of deep and serious global economic risks as "exchange rates of major currencies fluctuate drastically and international financial markets suffer from persistent volatility."
At a meeting Saturday between Obama and Hu, White House officials said Obama welcomed as a "first step" China's currency announcement. But Obama, the officials said, noted that implementation of the Chinese decision would be very important.
China has said its currency is at about the right level and that trade imbalances stem from other fundamental problems with the United States and other western economies.
Obama said he would work with congressional critics of China's currency and with American manufacturers. "We all have the same interest, and that is the United States can compete with anybody as long we've got an even playing field," Obama said.
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