However, “On this issue it is not justified for outsiders to exert pressure and we will not take action by bowing to this pressure,” a representative of the Chinese government said yesterday, indirectly responding to the US president. For China, the currency decision was an “internal affair”; having others saying what it should do would be “just a like a situation where you have caught a cold, but ask your neighbour to take the medicine”.
“I have been very clear of the fact that it is my estimation that the RMB [yuan] is undervalued, and that China's own decision in previous years to begin to move toward a more market-oriented approach is the right one,” Obama said. “I don't have a timetable, but it is my hope that China will make a decision that will ultimately be in their best interest,” he added.
Hu did not make public statement about the yuan in Washington on Tuesday, but Vice Foreign Minister Cui Tiankai reiterated Hu's assertion the previous day that the currency decision would be made based on China's economic situation.
At present, the yuan is pegged at 6.83 against the US dollar and has been so since July 2008. According to Western economists and analysts, the decision has given China a competitive edge.
Moreover, with a fixed exchange rate China has been able to accumulate huge holdings in US treasuries. Any appreciation would cut their value, as much as by a third, if Obama’s request were ever to be met.
In the United States, 130 lawmakers sent a letter last month to Treasury Secretary Timothy Geithner demanding the administration take action against China.
Geithner made a surprise visit to Beijing for talks with his Chinese counterpart.
Meanwhile, in Washington everyone is waiting for a report on the economic situation, which may label China a currency manipulator.