China's yuan rises as talks begin Bundles of yuan notes

Page last updated at 07:49 GMT, Tuesday, 17 June 2008 08:49 UK
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China's yuan rises as talks begin
Bundles of yuan notes
The US has long urged Beijing to let its currency strengthen

China's yuan is at its strongest level against the dollar since the country scrapped its peg to the US currency in July 2005.

The yuan rose to a high of 6.8918 per dollar - a gain of 20% since it ditched the fixed exchange rate.

The rise comes as US Treasury Secretary Henry Paulson prepares to meet with Chinese officials. China's currency policy has dominated previous meetings.

Analysts say China is letting its currency appreciate to cool inflation.

Many Asian countries are allowing their currencies to strengthen to counter the soaring cost of fuel and food.

Exchange rate reform

Trade and energy are expected to be the main talking points as high-level delegations from the US and China convene for two days of discussions in Maryland.

Mr Paulson instigated the regular talks, known as the Strategic Economic Dialogue, to tackle trade and currency issues when he joined the Bush administration in 2006.

The US has long urged China to move more quickly on yuan appreciation and Mr Paulson has said that exchange rate reform is critical to China's social stability.

The US also believes that Beijing uses regulations to favour domestic companies over foreign rivals and that Beijing does too little to address the theft of copyrights and patents held by Western companies

However, with the US economy still reeling from the sub-prime mortgage meltdown and resulting credit crunch, it is easier for China to reject such criticism.

Chinese officials have promoted their own more assertive style of economic management and regulation and chided the US for allowing the dollar to slide.

Business deals

China's commerce minister Chen Deming, who is taking part in the talks, said US and Chinese companies have signed business deals worth more than $8bn.

The agreements cover 35 deals in sectors ranging from the car industry to telecommunications.

In one deal, US car giant General Motors said it had signed a pact worth a $1bn.

It is not clear whether the next US administration will continue the talks.

Taken from :
http://news.bbc.co.uk