China’s Hu says to seek domestic growth, FX reform

By Chris Buckley

YOKOHAMA, Japan (BestGrowthStock) – China will seek to expand domestic demand and remains committed to reforming its exchange rate, President Hu Jintao said, following months of friction over Beijing’s currency policy and large trade surplus.

Hu told a regional business forum in Japan on Saturday that China “will make vigorous efforts to establish lastingly effective means for expanding domestic demand, especially consumer demand.”

China’s rapid growth has helped to shore up the global economy and spur on Asia while the United States and Europe have struggled with high unemployment and financial woes.

But international tensions over China’s growing clout and how it plans to use it spilled over into a summit of the Group of 20 (G20) leading economies in Seoul that ended on Friday.

“China will continue making encouragement of a balanced international balance of payments an important task in ensuring macroeconomic stability,” Hu told a business forum in the port city of Yokohama, which is hosting the Asia-Pacific Economic Cooperation (APEC) summit over the weekend.

China has also been at odds with Japan after a sea territory dispute flared in September, and the United States has pressed China over its yuan exchange rate, which Washington argues is held artificially low, unfairly boosting Chinese exports.

“China will continue going forward with reform of the renminbi exchange rate formation mechanism on the basis of retaining initiative, controllability and gradualness,” Hu said.

CURRENCY REFORM

China has maintained a drumbeat of criticism of U.S. easy money policies over recent days, claiming that Washington could destabilize the global economy and inflate asset bubbles after the U.S. Federal Reserve announced it was going pump as much as $600 billion into the economy.

Treasury Secretary Timothy Geithner last month put off a decision on whether China is manipulating its currency for trade advantage until some time after the G20 summit and the APEC gathering in Yokohama.

“China will adhere to open development, to a fundamental national policy of opening up,” Hu said.

The Chinese president also pointed to the importance of newly emerging economies in the global economy.

“Especially in responding to the international financial crisis, the emerging market economies led the way in economic recovery and have maintained quite fast growth,” Hu said.

Separately, Hu met a senior Taiwanese politician, Lien Chan, on the sidelines of the APEC summit to discuss economic relations, which have been at odds since 1949 when Nationalist, or Kuomintang, forces fled to the island from the mainland to escape victorious Communist forces.

Taiwan and China this year signed an Economic Cooperation Framework Agreement, which may pull the island economically closer to the fast-growing mainland and eventually open the way for discussion of their political future.

China insists that Taiwan accept eventual unification.

Hu told Lien, honorary chairman of Taiwan’s ruling Kuomintang Party, that Beijing wanted to focus on economic flows for now.

“We’ll keep to a steady approach of first dealing with easy issues, and then difficult ones, and with economics issues first and politics later,” Hu told Lien, according to China’s official Xinhua news agency.

(Editing by Edmund Klamann)

China’s Hu says to seek domestic growth, FX reform