China's Hu upbeat, resists U.S. pressure on yuan

Chinese President Hu Jintao urged an end to a zero sum Cold War relationship with the United States and proposed new cooperation, but resisted U.S. arguments about why China should let its currency strengthen.

Indeed, in a sign that the future of the U.S. currency continues to concern the most senior levels of the Chinese government, he said the dollar-based international currency system is a product of the past.

Overall though, the president, who will visit Washington this week, struck an upbeat tone about ties with the United States in a rare written interview with two U.S. newspapers, the Wall Street Journal and the Washington Post.

We should abandon the zero-sum Cold War mentality, he declared, and respect each other's choice of development path.

Hu suggested cooperation with the United States in areas like new energy sources, clean energy, infrastructure development, aviation and space.

He also reassured foreign businesses in China that Beijing would continue to improve laws and regulations affecting them.

And he spoke encouragingly about the outlook for resolving tensions on the Korean peninsula, an area of concern to both Washington and Beijing.

But the Chinese president also indicated he does not accept U.S. arguments for Beijing to let its currency appreciate. Critics say China's undervaluing of the yuan gives it an unfair price advantage in international trade, contributing to the huge U.S. trade deficit.

Analysts thought Hu's generally conciliatory tone augured well ahead of his Washington meetings with President Barack Obama and other officials.

Hu makes it clear that China intends to move forward on opening its markets, freeing up its exchange rate and restructuring its political system, but at its own pace and with little heed to external pressures for more rapid or broader reforms, said Eswar Prasad, a Brookings Institution economist and former International Monetary Fund official.

TALKING BACK TO GEITHNER

Last week U.S. Treasury Secretary Timothy Geithner said China would be better off letting its currency strengthen to cap inflation.

But Hu said China is fighting inflation with a range of policies including interest-rate increases, and inflation can hardly be the main factor in determining the exchange rate policy.

He suggested that inflation was not a big headache, saying prices were on the whole moderate and controllable. Inflation in China hit a 28-month high in November.