Increasing global frustration over China's currency waffling threatens to overshadow U.S. President Barack Obama's trade agenda as his first presidential visit to Asia gets under way.
After failing to win an agreement on easing currency controls at the Asia-Pacific Economic Co-operation summit in Singapore over the weekend, Mr. Obama will need careful diplomacy in his meetings with Chinese President Hu Jintao and Prime Minister Wen Jiabao this week. Despite earlier indications that China's central bank was willing to relax the yuan's effective 16-month peg to the U.S. dollar, Mr. Hu carefully avoided any mention of the issue this weekend, instead attacking what he termed “unreasonable” trade restrictions on developing nations.
Underscoring the uncertainty, a final statement from APEC leaders omitted a reference to “market-oriented exchange rates” – included in an earlier draft version – because Chinese and U.S. negotiators could not agree on the wording. Chinese Vice Commerce Minister Chen Jian Sunday backed away from suggestions the central bank had signalled a policy shift on the yuan.
Though China has been under increasing pressure from the U.S. and its Asian neighbours to relax its currency policy, officials there have been loathe to do so for fear of dampening modest signs of recovery in its exports. “Economies around the world are beginning to grow again. And we are on the path to recovery,” Mr. Obama said in remarks to APEC delivered before travelling to Shanghai last night.
http://www.theglobeandmail.com/report-on-business/currency-rift-casts-shadow-on-obamas-trade-hopes/article1364235/