China backs exchange rate reforms but no timetable

[May 24, 2010]  BEIJING (AP) -- China promised currency reforms Monday as it opened a high-level dialogue with Washington but said it will decide the pace and pressed for an end to U.S. curbs on high-tech exports.

President Hu Jintao made the pledge at the start of the two-day meeting, apparently trying to defuse a key irritant as officials began wide-ranging talks on financial market reforms, trade and reviving global growth.

"China will continue to steadily advance the reform of the formation of the renminbi exchange rate mechanism under the principle of independent decision-making, controllability and gradual progress," Hu said. U.S. Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner sat onstage behind him at Beijing's Great Hall of the People.

The yuan has been frozen against the dollar since late 2008 to help Chinese exporters compete abroad, despite complaints by Washington and others that it is undervalued and distorts trade. Analysts expected Beijing to let the yuan rise this year to ease strains in China's fast-growing economy but say Chinese leaders might postpone action after the European debt crisis threw the global outlook into doubt.

On Monday, Chinese and U.S. officials pledged cooperation and emphasized the interdependence of their giant economies -- the third biggest and biggest respectively. But their comments also reflected the strains in their relations and Beijing's growing assertiveness.

In a separate session with Geithner, Vice Premier Wang Qishan pressed for an end to export controls on "dual use" technology with possible military applications. Beijing says such exports could help to cut the U.S. trade deficit, but American officials say few products are affected and the curbs are needed for national security.

"During this dialogue, we hope to hear from the U.S. side in detail its timetable and roadmap for gradually removing barriers to high-tech exports to China," Wang said.

Washington is reviewing its export controls, which are meant to deny China's military access to technology that might aid its modernization. They apply to goods such as supercomputers, lasers, navigation systems and high-performance materials used in missiles.

Last week, Commerce Secretary Gary Locke said the controls affect less than 1 percent of U.S. exports and 98 percent of requests for export licenses are granted. Locke said the review of the system was expected to be completed by summer and Washington would then decide whether to change its controls.

Geithner emphasized U.S. concern over Beijing's "indigenous innovation" policy meant to promote domestic technology creators. China announced last year it would favor locally designed products in government procurement but backed down after complaints by Washington and Europe and said in April it will allow foreign-owned companies to qualify as suppliers.

"We are asking that China give American firms the same opportunities to compete in China that Chinese companies enjoy in the United States," Geithner said.

Speaking on Monday in Shanghai, the president of the U.S. Chamber of Commerce, Thomas J. Donahue, called on the two governments to take steps to boost trade. Donahue said he met last week with Chinese officials and expressed concern about "indigenous innovation" and other discriminatory policies.

"There are growing concerns about whether China is backtracking on the progress it has made to open its economy," Donahue said, according to a text of his remarks. "These concerns have risen to the highest level I have seen in 10 years."

[Associated Press; By JOE McDONALD]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.