- Associated Press - Tuesday, January 18, 2011

WASHINGTON (AP) — U.S. companies have long demanded that China let its currency rise to make U.S. exports cheaper. But as President Hu Jintao visits Washington this week, U.S. companies are stressing other goals: Stopping the theft of intellectual property. And getting a fair chance to win government contracts.

No one expects any big breakthroughs. Instead, many U.S. companies hold out hope that the meetings between Hu and President Barack Obama will make it easier to reach long-term solutions to the major trade disputes dividing the world’s two largest economies.

Hu sounded conciliatory on the eve of his trip.

“We both stand to gain from a sound China-U.S. relationship, and lose from confrontation,” he said in responses to questions from The Wall Street Journal and The Washington Post.


But Hu also argued that the U.S. dollar’s dominance of financial markets was a “product of the past,” suggesting China would seek a more assertive role in the future. He passed up a chance to signal China’s willingness to let its currency rise further against the dollar, a key U.S. demand.

“We should expect over time incremental progress,” says Myron Brilliant, senior vice president for international affairs at the U.S. Chamber of Commerce.

The Chinese currency, the yuan, has long been the No. 1 irritant in U.S.-China trade relations. The U.S. and other countries charge that China keeps its currency artificially low. They say that gives Chinese exporters an unfair edge. A low-priced yuan makes Chinese products cheaper in the U.S. and U.S. products costlier in China.

The currency tensions have eased in recent weeks. In part, that’s because the yuan has climbed 3.5 percent against the dollar since June. Its rise is even larger — about 5 percent — if inflation is taken into account.

And many economists think Beijing will push the yuan higher to fight resurgent inflation. That would reduce the cost of U.S. and other foreign products in China.

Yet Hu seemed to dismiss that idea in his comments to the U.S. newspapers. “Inflation can hardly be the main factor in determining the exchange-rate policy,” he said.

Treasury Secretary Timothy Geithner declared China’s currency “significantly undervalued” in advance of Hu’s visit.

Obama is sure to raise concerns about the yuan’s value in his discussions with Hu. But the Chinese are just as sure to avoid the appearance of bowing to foreign pressure.

“The Chinese are going to move fairly cautiously,” said Nariman Behravesh, chief economist at IHS Global Insight, a private forecasting firm. “Our best bet is that Beijing will move the currency up by around 5 to 7 percent a year for the next two to three years.”

On Tuesday, the Beijing government said a Chinese trade mission signed $600 million in deals with U.S. companies ahead of Hu’s visit, and a separate delegation will pursue other opportunities.

The six deals signed Monday in Houston cover imports of porcelain and cotton and an agreement to collaborate on developing solar power equipment, the government said.

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