UPDATE 2-China’s Hu says to seek domestic growth, FX reform

* China’s Hu points to importance of newly emerging economies

* Hu says to encourage balanced balance of payments

* Hu pledges China will continue opening up economy

* Hu tells Taiwan will deal with economic issues first
(Adds meeting with Taiwan politician in final four paragraphs)

By Chris Buckley

YOKOHAMA, Japan, Nov 13 (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
destabilise 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.

U.S. 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)

UPDATE 2-China’s Hu says to seek domestic growth, FX reform