Sino-US Relations Rattled by Heated Debate Over Yuan

The U.S. and China are fighting over the value of the Chinese currency yuan, a topic which topped the agenda of the two-hour summit between President Barack Obama and Chinese Premier Wen Jiabao in New York Thursday.

Jeffrey Bader, an Asia expert on the National Security Council of the White House, told reporters after the summit that the currency issue was intensively discussed, saying, "The Obama administration must do more to ease tensions over the value of China`s currency."

Obama reportedly urged increasing the yuan`s value and stressed that both countries should avoid trade conflict.

Bader quoted Wen as expressing Beijing`s intent to continue reforming its exchange rate mechanism. "All the gaps between the U.S. and China can be addressed through conversation and China has a constructive attitude," Bader said.

China did not hold a news briefing after the meeting. In the official announcement after the meeting, the two countries did not mention key agenda such as the currency debate, just calling the talks "very positive."

The currency debate, however, was heated enough to describe as a war. Obama told a town hall event aired by CNBC Monday, "The yuan is valued lower than market conditions would say it should be. In order to increase exports twice over the next five years, we play a fair game in the large market of China, and the appreciation of the yuan is essential."

"We are in a situation that only China sells goods to us while we cannot sell to China."

Wen also stood his ground. In a dinner hosted by friendship groups of the two countries, he said, "There is no ground to drastically increase the value of the yuan. The yuan should not be politicized by economic issues."

He also denied that the trade imbalance between the U.S. and China is caused by the currency issue.

Washington, however, is strongly pushing for the yuan`s appreciation. U.S. Treasury Secretary Timothy Geithner, U.S. Trade Representative Ron Kirk and House of Representatives Speaker Nancy Pelosi supported this.

The House Committee on Ways and Means is set to consider legislation of a law on currency reform for fair trade to push China. The bill considers Beijing`s policy of a weak yuan as a trade subsidy eligible to be offset by countervailing duties.

yhchoi65@donga.com