Wen pledged to Obama more flexibility on yuan

Chinese Premier Wen Jiabao pledged to US President Barack Obama that China will increase the flexibility of fluctuations in its currency, the official China Central Television reported.

China will push forward yuan reform in an active, gradual and controllable manner, the television station cited Wen as telling Obama on Saturday in Bali, Indonesia. China is closely monitoring changes in the yuan's exchange rate, the report said.

Policymakers in the world's second-largest economy have pledged to adjust the nation's growth toward domestic demand and narrow its external surplus to help address lopsided flows of trade and investment that contributed to the global financial crisis of 2008.

Unbalanced trade flows have triggered calls from the US and other Group of 20 nations for China to allow its currency to trade more flexibly.

Chinese President Hu Jintao told Obama at a November 12 meeting that a large appreciation won't solve US problems.

During a trip that began on November 11 in Hawaii, Obama announced steps to expand trade and military cooperation with Asia-Pacific nations that share US concerns over China's currency and intellectual property policies and territorial claims.

The yuan is allowed to fluctuate 0.5 per cent on either side of the daily fixing rate set by the central bank. China's yuan has appreciated 4.13 per cent against the dollar this year, according to Bloomberg data, the best performance of 10 Asian currencies tracked by Bloomberg.

FINAL STOP
Obama's meeting with Wen was on the final leg of the president's Asia-Pacific journey that also included a stop in Australia.

The non-deliverable forwards market reflected expectations of a depreciation since the end of September, which is the market's reaction to the yuan's exchange rate rather than an artificial move, Wen told Obama, according to the report.

The currency will climb 4.3 per cent to 6.08 per dollar in Shanghai by the end of next year, according to the median estimate of 18 analysts surveyed by Bloomberg.

The US welcomes China's commitment to increase yuan flexibility, Gary Locke, the US Ambassador to China, said on Friday at a conference in Beijing.