China to study currency shift

The weak yuan is costing American jobs, Washington says

China has agreed to study how it "could move more rapidly" towards letting the markets set the value of its currency, following pressure from the United States.

But Chinese President Hu Jintao ruled out a rapid shift in the value of the yuan, warning it would cause instability in Asia.

Mr Hu met US President George W Bush for private talks ahead of the Asia-Pacific Economic Cooperation (APEC) summit which began in Thailand on Monday.

Mr Bush, who faces re-election next year, is under pressure from US manufacturers to lobby China to let the yuan, also known as the renminbi (RMB), to float higher in response to market forces.

US critics say China's fast-growing trade surplus threatens American jobs and they want the Bush administration to repeal China's trade privileges in the US.

But a senior Chinese official told Reuters that although Beijing was willing to set up an expert group with the US to study the yuan, it would be cautious about moving too quickly to float the currency.

Other developments at Apec

President George Bush is promoting a stronger stance on terrorism

The US emphasis on security upsets some Apec members, who believe the organisation should stick to its stated mission of promoting free trade.

Pacific Rim leaders discuss how to restart the World Trade Organisation talks which stalled in Cancun, Mexico, last month.

President Bush held a private meeting with South Korean leaders about the nuclear crisis with North Korea

Tight security and tough action resulted in almost empty streets in Bangkok and none of the kind of violent protests that have overshadowed other trade summits recently

'Dialogue' promised

In a speech to businessmen before he met Mr Bush - Mr Hu repeated Beijing's mantra that its foreign-exchange policy is consistent with the current state of China's economy.

BUSH IN ASIA Rob Watson's reporter's diary Bush focuses summit on terror

"On the basis of this system, keeping the exchange rate of the RMB stable serves China's economic performance and conforms to the requirements of the economic development of the Asia-Pacific region and the whole world," he said.

"We will maintain the basic stability of the RMB exchange rate at a reasonable and balanced level..." he added.

Earlier, the governor of the People's Bank of China said it might be willing to widen the band in which the Chinese yuan is being pegged to the US dollar.

But in an interview with the Xinhua news agency, Zhou Xiaochuan said the free float of the currency would take "a relatively long time".

He said China was willing to widen the range in which the yuan was being traded from between 8.3 and 8.7 yuan to the dollar - if a regional consensus was agreed.

But he said views on the issues varied and some neighbouring countries "believe it is not the right time to make such a move."

Recession fears

The news about the Chinese currency is the first major economic development to come out of President Bush's tour of Asia.

As the Apec summit got underway in Bangkok, some Apec members were reportedly upset that the agenda was being dominated by the war on terror rather than free trade.

Recession trends will again take place if we don't commit ourselves to a new round and try to finish it in due time Supachai Panichpakdi, WTO chief

"We know, of course, that security is a very important matter, and we admit that, but it should be discussed in other forums," Malaysia's Prime Minister Mohamad Mahathir was quoted as saying in local press.

Asian and Pacific leaders are urging the World Trade Organisation (WTO) to concentrate on restarting talks on a new global commerce agreement, following the collapse of talks in Cancun, Mexico last month.

WTO chief Supachai Panichpakdi told a fringe meeting of Asia-Pacific business leaders there was little option but to ensure the successful completion of the Doha round of multilateral trade talks, of which Cancun was central part.

"Recession trends will again take place if we don't commit ourselves to a new round and try to finish it in due time," Mr Panichpakdi warned.

Apec groups 21 Pacific Rim nations with a population of 2.8 billion: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, the United States and Vietnam.